Exhibit 10.4
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PURCHASE AGREEMENT
by and among
ARJO WIGGINS APPLETON p.l.c.,
ARJO WIGGINS US HOLDINGS LTD.,
ARJO WIGGINS NORTH AMERICA INVESTMENTS LTD.,
PAPERWEIGHT DEVELOPMENT CORP.
and
NEW APPLETON LLC
Dated as of July 5, 2001
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TABLE OF CONTENTS
Page
1. DEFINITIONS ..................................................................... 2
1.1 Definitions ............................................................ 2
1.2 Other Definitions ...................................................... 5
2. SALE AND TRANSFER OF PARTNERSHIP INTERESTS; PURCHASE PRICE ...................... 13
2.1 Transfer and Sale of Partnership Interests ............................. 13
2.2 Purchase Price ......................................................... 14
2.3 Payment of Purchase Price .............................................. 14
2.4 Cash Adjustments and the Like .......................................... 14
3. REPRESENTATIONS AND WARRANTIES OF SELLERS AND SELLER PARENT ..................... 15
3.1 Corporate Existence of Sellers ......................................... 15
3.2 Corporate Authority of Sellers ......................................... 15
3.3 Corporate Existence of Purchased Entities .............................. 16
3.4 Capitalization of AWDGP and AILLC ...................................... 16
3.5 Capitalization of Purchased Entities (other than AWDGP and AILLC) ...... 17
3.6 Governmental Approvals; Consents ....................................... 18
3.7 Financial Statements ................................................... 18
3.8 Real and Personal Properties ........................................... 19
3.9 Contracts .............................................................. 20
3.10 Litigation; Orders ..................................................... 21
3.11 Intangible Property Rights ............................................. 21
3.12 Tax Matters ............................................................ 23
3.13 Employment and Benefits ................................................ 23
3.14 Compliance with Laws ................................................... 27
3.15 Finders; Brokers ....................................................... 27
3.16 Environmental Matters .................................................. 28
3.17 No Other Representations or Warranties ................................. 30
3.18 Undisclosed Commitments or Liabilities ................................. 30
3.19 Warranties True and Correct ............................................ 30
4. REPRESENTATIONS AND WARRANTIES OF BUYERS ........................................ 31
4.1 Corporate Existence .................................................... 31
4.2 Corporate Authority .................................................... 31
4.3 Governmental Approvals; Consents ....................................... 32
4.4 Finders; Brokers ....................................................... 32
4.5 Purchase for Investment ................................................ 32
4.6 No Other Representations or Warranties ................................. 33
4.7 Due Diligence .......................................................... 33
4.8 The ESOP ............................................................... 33
TABLE OF CONTENTS
(continued)
Page
5. AGREEMENTS OF ALL PARTIES ............................................. 33
5.1 Operation of the Business .................................... 33
5.2 Mutual Cooperation; No Inconsistent Action ................... 35
5.3 Public Disclosures ........................................... 37
5.4 Access to Records and Personnel .............................. 38
5.5 Employee Relations and Benefits .............................. 39
5.6 Repayment of Appleton Debt ................................... 40
5.7 Business Guarantees .......................................... 41
5.8 Tax Returns and Elections .................................... 42
5.9 Tax Indemnity; Tax Refunds ................................... 44
5.10 Change and Use of Names ...................................... 48
5.11 Mail Received After Closing .................................. 48
5.12 Fox River Liability .......................................... 49
5.13 Financing .................................................... 49
5.14 Reorganization ............................................... 49
5.15 Confidentiality .............................................. 50
5.16 Professional Advisors ........................................ 52
6. CONDITIONS ............................................................ 52
6.1 Condition to the Obligations of Buyers and Sellers ........... 52
6.2 Conditions to the Obligations of Buyers ...................... 52
6.3 Condition to the Obligations of Sellers ...................... 53
7. CLOSING ............................................................... 53
7.1 Closing Date ................................................. 53
7.2 Buyers' Deliveries ........................................... 53
7.3 Sellers' Deliveries .......................................... 55
8. INDEMNIFICATION ....................................................... 57
8.1 Agreement to Indemnify ....................................... 57
8.2 Survival of Representations and Warranties ................... 59
8.3 Claims for Indemnification ................................... 60
8.4 Defense of Claims ............................................ 60
8.5 Indemnification Calculations ................................. 63
8.6 Right of Set-Off ............................................. 63
8.7 Security ..................................................... 64
8.8 Exclusive Remedy ............................................. 65
9. COVENANT NOT TO COMPETE ............................................... 66
9.1 Seller Parent Non-Compete .................................... 66
9.2 Non-Disclosure of Proprietary Confidential Information;
Trade Secrets ............................................... 68
9.3 Buyers Non-Compete ........................................... 70
9.4 Severability ................................................. 72
ii
TABLE OF CONTENTS
(continued)
Page
9.5 Enforcement.............................................................. 73
9.6 Termination of Covenants ................................................ 73
9.7 Continuation of Covenant ................................................ 75
10. TERMINATION ...................................................................... 76
10.1 Termination Events ...................................................... 76
10.2 Effect of Termination ................................................... 77
11. DISPUTE RESOLUTION ............................................................... 77
11.1 Negotiation Between Executives .......................................... 77
11.2 Mediation ............................................................... 78
11.3 Arbitration ............................................................. 78
11.4 Fees, Costs and Expenses ................................................ 79
11.5 Depositions ............................................................. 79
12. SELLER PARENT GUARANTEE .......................................................... 79
13. MISCELLANEOUS AGREEMENTS OF THE PARTIES .......................................... 80
13.1 Notices ................................................................. 80
13.2 Transfer Taxes .......................................................... 81
13.3 Further Assurances ...................................................... 82
13.4 Expenses ................................................................ 82
13.5 Assignment .............................................................. 82
13.6 Amendment; Waiver ....................................................... 83
13.7 Joint and Several Liability ............................................. 83
13.8 Schedules ............................................................... 83
13.9 Third Parties ........................................................... 84
13.10 Governing Law ........................................................... 84
13.11 Consent to Jurisdiction ................................................. 84
13.12 Entire Agreement ........................................................ 85
13.13 Section Headings; Table of Contents ..................................... 85
13.14 Severability ............................................................ 85
13.15 Counterparts ............................................................ 85
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EXHIBITS
Exhibits A-1 and A-2 Fox River Indemnification Agreements
Exhibit B Escrow Agreement
Exhibit C Managers' Certificates
SCHEDULES
1.2(a) Appleton Debt
1.2(b) Managers
1.2(c) Other Excluded Liabilities
1.2(d) Permitted Liens
2.3 Terms of Deferred Payments
2.4 Cash Payments and Adjustments at Closing
3.2 Corporate Authority of Sellers
3.3 Exceptions to Good Standing
3.5 Capitalization of Purchased Entities
3.6 Governmental Approvals; Consents
3.7 Financial Statements
3.8 Owned and Leased Real Property
3.9 Disclosed Contracts
3.10 Litigation; Orders
3.11(a) Patent Rights
3.11(b) Trademark Rights
3.11(c) Copyrights
3.12 Tax Matters
3.13(a) Labor Controversies
3.13(b)(i) Benefit Plans
3.13(b)(ii) Compliance with ERISA Laws
3.13(b)(iii) ERISA Violations
3.13(b)(vii) Multiemployer Plans
3.13(b)(viii) Retiree Benefits
3.14 Compliance with Laws
3.16 Environmental Matters
3.18 Undisclosed Commitments or Liabilities
4.3 Governmental Approvals; Consents (Buyers)
5.1 Permitted Transactions
5.5(b) Collective Bargaining Agreements
5.5(d) Stand-Alone Benefit Plans
5.7 Known Business Guarantees
5.13 Commitment Letters
5.14(a) Reorganization Transaction
7.2(j) Intercompany Agreements
8.7 Seller Parent's Consolidated Tangible Net Assets
9.1-1 Period Maximum Sales
9.1-2 Existing Accounts
13.4 Transaction Expenses
PURCHASE AGREEMENT
This PURCHASE AGREEMENT, dated as of July 5, 2001 (this "Agreement"), is by
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and among Arjo Wiggins US Holdings Ltd., a corporation formed under the laws of
England and Wales ("Seller 1"), Arjo Wiggins North America Investments Ltd., a
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corporation formed under the laws of England and Wales ("Seller 2", and together
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with Seller 1, "Sellers"), ARJO WIGGINS APPLETON p.l.c., a corporation formed
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under the laws of England and Wales ("Seller Parent"), PAPERWEIGHT DEVELOPMENT
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CORP., a Wisconsin corporation ("Buyer 1"), and NEW APPLETON LLC, a Wisconsin
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limited liability company wholly owned by Buyer 1 ("Buyer 2", and together with
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Buyer 1, "Buyers").
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W I T N E S S E T H:
WHEREAS, Seller 1 owns eighty-seven and one-half percent (87.5%) and Seller
2 owns twelve and one-half percent (12.5%) of the right, title and interest in
Arjo Wiggins Delaware General Partnership, a Delaware general partnership
("AWDGP"), through which Sellers possess membership interests in Appleton
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Investments LLC, a Delaware limited liability company ("AILLC"). Sellers'
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interests in AWDGP (through which they possess membership interests in AILLC)
are hereinafter called the "Partnership Interests" and each of Seller 1's and
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Seller 2's interests is hereinafter called a "Partnership Interest"; and
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WHEREAS, AILLC is the owner of all of the issued and outstanding capital
stock of Appleton Papers Inc. ("Appleton"); and
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WHEREAS, Buyers wish to buy, and Sellers wish to sell, the Partnership
Interests for the Purchase Price.
NOW, THEREFORE, in consideration of the premises and the mutual promises
contained herein, the parties hereby agree as follows:
1. DEFINITIONS.
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1.1 Definitions. Defined terms used in this Agreement, whether
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capitalized or not, are defined, and shall have the meanings ascribed to such
terms, in the following locations within this Agreement:
Defined Term Section Page
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2001 Taxes 5.9(a) 44
Affiliate 1.2 5
Agreement Introduction 1
AILLC Introduction 1
Ancillary Agreements 3.1 15
Appleton Introduction 1
Appleton Debt 1.2 6
AWDGP Introduction 1
AWSA Note 1.2 6
Benefit Plans 1.2 6
Books and Records 5.4(a) 38
Budget 5.9(c)(ii) 45
Business 1.2 6
Business Day 1.2 7
Business Employees 1.2 7
Business Guarantees 5.7 41
Buyer 1 Introduction 1
Buyer 2 Introduction 1
Buyer Competitive Activity 9.2 70
Buyer Indemnitees 8.1(a) 57
Buyer Required Consents 4.3(b) 32
Buying Parties 9.6(a) 74
Buyers Introduction 1
Buyers' knowledge 1.2 7
Cash Payment 2.3(a) 14
Closing 7.1 53
Closing Date 7.1 53
2
Defined Term Section Page
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Code 1.2 7
Confidential Information 5.15(a) 50
Contracts 3.9(a) 20
Covered Period 9.1(a) 66
Covered Sales 9.1(a) 67
Covered Territory 9.1 67
Debt Financing 5.13 49
Deferred Payment 2.3(b) 14
Disclosed Contracts 3.9(a) 20
Eligible Parties 5.4(b) 38
Environmental Claims 3.16(a)(iii) 29
Environmental Laws 1.2 7
Environmental Losses 1.2 7
Environmental Permits 3.16(a)(i) 28
ERISA 1.2 7
ESOP 1.2 8
Excluded Operations 1.2 8
Excluded Operations Liability 1.2 8
Excluded Operations Taxes 8.1(a)(v)(B) 58
Facilities 3.8(b) 19
Facility 3.8(b) 19
Financial Statements 3.7 18
Foreign Governmental Consents 5.2(c) 36
Fox River Indemnification Agreements 1.2 8
Fox River Liability 1.2 9
GAAP 1.2 9
Harrisburg Facility 5.14 49
Harrisburg Proceeds 1.2 9
Hazardous Substances 1.2 9
HSR Act 1.2 9
Income Taxes 1.2 9
Indemnitees 8.1(b) 59
Intercompany Debt 1.2 5
Intercompany Interest 1.2 9
Known Business Guarantees 5.7 41
Leased Real Property 3.8(b) 19
Lenders 5.13 49
3
Defined Term Section Page
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Liabilities 1.2 9
Liability 1.2 9
Liens 1.2 10
Loss 1.2 10
Managers 1.2 10
Material Adverse Effect 1.2 10
Maximum Amount 8.1(a)(v) 58
Net Income Taxes 1.2 10
Net Refunds 5.9(c)(ii) 45
Newton Falls Facility 1.2 10
Other Excluded Liabilities 1.2 10
Owned Real Property 3.8(b) 19
Partnership Interest Introduction 1
Partnership Interests Introduction 1
Patent Rights 3.11(a) 22
Period Maximum Sales 9.1 67
Permits 1.2 11
Permitted Acquired Business 9.1(a) 67
Permitted Liens 1.2 11
Permitted Transactions 5.1 33
Person 1.2 11
Prior Taxpayers 5.9(c) 45
Proceeding 1.2 11
Proprietary Confidential Information 9.2(b) 69
Purchase Price 2.2 14
Purchased Entity 1.2 12
Real Property 3.8(b) 19
Reference Rate 1.2 12
Reorganization 5.14 49
Retained Refunds 5.9(c)(ii) 46
Securities Act 1.2 12
Seller 1 Introduction 1
Seller 2 Introduction 1
Seller Competitive Activity 9.1 67
Seller Indemnitees 8.1(b) 59
Seller Parent Introduction 1
Seller Required Consents 3.6(b) 18
4
Defined Term Section Page
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Sellers Introduction 1
Sellers' Business 1.2 12
Sellers' knowledge 1.2 12
Selling Parties 9.6(a) 73
Stand-Alone Benefit Plans 5.5(d) 40
Subsidiaries 1.2 12
Subsidiary 1.2 12
Tax Benefit 8.5(a) 63
Tax Contest 5.9(e) 47
Tax Contest Settlement 5.9(e) 47
Tax Designee 5.9(d) 46
Tax Indemnified Parties 5.9(a) 44
Tax Loss Benefit 1.2 12
Tax Refunds 5.9(c) 45
Tax Notice 5.9(d) 46
Taxes 1.2 13
Technology 1.2 13
Third Party Claim 8.4(a) 60
Trademark Rights 3.11(b) 22
Transaction Expenses 13.4 82
1.2 Other Definitions. The following defined terms shall have the
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following meanings:
"Affiliate" shall mean with respect to any Person, any Person
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controlling, controlled by, or under common control with, such Person.
"Appleton Debt" shall mean (i) the principal amount of those interest
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bearing obligations of the Purchased Entities set forth on Schedule 1.2(a),
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together with any prepayment penalties or "make-whole" provisions payable in
connection therewith, increased or decreased, as the case may be, by (ii) the
net principal amount of all monetary debt obligations owing as between any
Purchased Entity, on the one hand, and the Seller Parent, Sellers and their
respective Affiliates (other than the Purchased Entities), on the other hand
("Intercompany
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5
Debt") and including, without limitation, the obligations under the AWSA Note;
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provided, however, that Intercompany Debt shall not include trade accounts
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payable and trade accounts receivable arising in the ordinary course of
business. For the avoidance of doubt, (i) the Intercompany Debt, representing
the net amount owed by the Purchased Entities, was $150,666,000 on June 30, 2001
and (ii) the payment made in respect of the Intercompany Debt in the month of
June, 2001 was a payment of principal and not a payment of Intercompany
Interest.
"AWSA Note" shall mean that certain Promissory Note, dated January 5,
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1994, made by Arjo Wiggins s.a. to the order of Arjo Wiggins Investments, Inc.,
in the original principal amount of $125 million and subsequently transferred to
Appleton.
"Benefit Plans" shall mean all employee benefit plans (as defined in
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Section 3(3) of ERISA), pension, retirement savings, stock purchase, stock
option, severance, employment, change-in-control, vacations, fringe benefit,
collective bargaining, bonus, incentive, deferred compensation, disability,
health, hospitalization, life, welfare and all other plans, agreements,
programs, policies or other arrangements (i) under which any employee or former
employee of the Purchased Entities has any present or future right to benefits
and (ii) under which any Purchased Entity has any present or future liability.
"Business" shall mean the manufacture and sale of carbonless copying
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paper, thermal paper, security paper, certain specialty coated papers and new
products being developed by Appleton's new business development organization, as
being carried on at the date hereof by the Purchased Entities and, for the
avoidance of doubt, specifically excluding the business of the manufacture and
sale of coated papers that was transferred to Appleton Coated LLC as of January
1, 2000.
"Business Day" shall mean any day, excluding Saturday, Sunday and any
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other day on which commercial banks in New York, New York or London, England are
authorized or required by law to close.
"Business Employees" shall mean all individuals employed by the
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Purchased Entities on the Closing Date.
"Buyers' knowledge," or words of a similar import, whether capitalized
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or not, shall mean the actual present awareness of the Managers.
"Code" shall mean the Internal Revenue Code of 1986, as amended, and
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the rules and regulations promulgated thereunder.
"Environmental Laws" shall mean any and all applicable foreign,
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federal, state and local laws, rules, regulations, statutes, requirements,
ordinances, codes, policies, orders and any obligations, liabilities or
responsibilities arising thereunder relating to pollution or the emission,
discharge or release of Hazardous Substances into the environment or the
protection of the environment, public health and/or workplace health and safety,
promulgated or issued by legislative bodies, or other competent authorities,
tribunals or organizations. Environmental Laws include the Occupational, Safety
and Health Act, the regulations promulgated thereunder, and any state or foreign
equivalents.
"Environmental Losses" shall mean any liability (i) pursuant to
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Section 8.1(a)(i)(A) as a result of the inaccuracy or breach of the
representations and warranties set forth in Section 3.16 or (ii) relating to
matters set forth as items B1 through B8 on Schedule 1.2(c).
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"ERISA" shall mean the Employee Retirement Income Security Act of
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1974, as amended, and the rules and regulations promulgated thereunder.
7
"ESOP" shall mean the employee stock ownership plan component of the
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Appleton Papers Retirement Savings Plan.
"Excluded Operations Liability" shall mean (i) any and all Liabilities
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to the extent relating to or arising from the conduct of the businesses now or
formerly within the following entities: Newton Falls, Inc., Appleton Coated LLC,
Appleton Capital Inc., Appleton Leasing LLC, Arjo Wiggins Investments Inc.,
PaperHub.com, Inc., Appleton Recycled Fibers, Inc., Arjo Wiggins S.A., AWA
Finance Limited (formerly Idem Limited), Arjo Wiggins USA Inc., Arjo Wiggins
Medical Inc., MuRo Inc. and Arjo Wiggins Specialty Holdings, Inc. (the "Excluded
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Operations") or the ownership or transfer of any equity securities or business
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operations or assets of any of the Excluded Operations prior to the Closing
Date; provided that (x) Liabilities relating to the operations of PaperHub.com,
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Inc. and Appleton Recycled Fibers, Inc. after the Closing Date shall not be
Excluded Operations Liabilities, and (y) Liabilities for pension and similar
benefits owing to Persons retired from the operations of the Business conducted
at the Harrisburg Facility shall not constitute Excluded Operations Liabilities,
and (ii) any Liability to the extent relating to the ownership of the real
properties upon which the Harrisburg Facility and the Newton Falls Facility are
located arising from noncompliance or alleged noncompliance with any
Environmental Law or the presence or alleged presence of Hazardous Substances at
or discharged from the Harrisburg Facility or the Newton Falls Facility;
provided that the Excluded Operations Liabilities shall not include those
Liabilities that are assumed by Appleton (or any successor tenant) under the
lease that is to be entered into for the distribution center used by the
Business located at the Harrisburg Facility.
"Fox River Indemnification Agreements" shall mean those environmental
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indemnification agreements (a) by and among Appleton and Buyers and (b) by and
among
8
Appleton, Buyers and AWA, in each case in the form set forth on Exhibit A-1 or
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A-2, respectively, with such modifications as may be reasonably requested by the
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Lenders in order to satisfy the terms of the commitment letter attached as
Schedule 5.13 hereto.
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"Fox River Liability" shall have the meaning assigned to the term
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"Excess Costs" in the Fox River Indemnification Agreements.
"GAAP" shall mean United States generally accepted accounting
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principles.
"Harrisburg Proceeds" shall mean any proceeds from the sale of the
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Harrisburg Facility if and when such sale occurs (whether to a third party or to
Seller Parent or its designee), minus (i) real estate brokerage fees, minus (ii)
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transfer taxes minus (iii) $1,400,000.
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"Hazardous Substances" shall mean any and all toxic, hazardous or
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dangerous substances, chemicals, mixtures, compounds, wastes or agents regulated
or prohibited by any Environmental Law.
"HSR Act" shall mean the Hart-Scott-Rodino Antitrust Improvements Act
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of 1976, as amended, and the rules and regulations promulgated thereunder.
"Income Taxes" shall mean Taxes measured by reference to the income of
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a Person (including withholding tax on payments to foreign Persons).
"Intercompany Interest" shall mean the sum of (i) the net amount of
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interest on the various obligations making up the Intercompany Debt through
September 30, 2001, and (ii) the amount of $221,918 per day on account of the
period from and including October 1, 2001 through, but not including, the
Closing Date.
"Liability" or "Liabilities" shall mean as to any Person, any debt,
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liability, obligation, cost or other out-of-pocket expense of any nature
whatsoever, whether now known or unknown, asserted or unasserted, accrued or
unaccrued, or liquidated or due or to become due,
9
absolute, contingent, consequential or otherwise, including without limitation,
any liability in respect of Taxes, Hazardous Substances or violations of
Environmental Laws of any kind whatsoever that affects such Person or its
Subsidiaries.
"Liens" shall mean all liens, claims, charges, security interests,
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options or other legal or equitable encumbrances (other than restrictions on
transfer generally arising under the Securities Act or other applicable
securities laws).
"Loss" shall mean any direct or indirect indebtedness, liability,
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claim, loss, damage, deficiency, obligation or responsibility, known or unknown,
fixed or unfixed, choate or inchoate, liquidated or unliquidated, secured or
unsecured, subordinated or unsubordinated, matured or unmatured, accrued,
absolute, contingent or otherwise, including, without limitation, liabilities on
account of Taxes, other governmental, regulatory or administrative charges,
fines or penalties or lawsuits relating thereto.
"Managers" shall mean those employees set forth on Schedule 1.2(b).
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"Material Adverse Effect" shall mean an event, condition,
-----------------------
circumstance, act, omission or effect which, individually or in the aggregate
with other related events, conditions, circumstances, acts, omissions or
effects, has or will have a direct financial consequence of Fifty Thousand
Dollars ($50,000.00) or more.
"Net Income Taxes" shall mean Income Taxes net of any applicable Tax
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Loss Benefit.
"Newton Falls Facility" shall mean the facility owned by Newton Falls,
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Inc. located in Newton Falls, NY.
"Other Excluded Liabilities" shall mean any Liability in respect of
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the matters set forth on Schedule 1.2(c).
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10
"Permits" shall mean licenses, permits or franchises issued by any
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United States or foreign, federal, state, provincial, municipal, territorial or
local authority or regulatory body and other governmental certificates,
authorizations and approvals.
"Permitted Liens" shall mean (i) those Liens set forth on Schedule
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1.2(d); (ii) Liens for Taxes, assessments and other governmental charges not yet
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due and payable or, if due, (A) not delinquent or (B) being contested in good
faith by appropriate proceedings during which collection or enforcement against
the property is stayed; (iii) mechanics', workmen's, repairmen's,
warehousemen's, carriers' or other like liens arising or incurred in the
ordinary course of business if the underlying obligations are not past due,
original purchase price conditional sales contracts and equipment leases with
third parties entered into in the ordinary course of business; and (iv) with
respect to Real Property, (A) recorded easements, licenses, covenants,
rights-of-way and other similar restrictions, including, without limitation, any
other agreements or restrictions which would be shown by a current title report
or other similar report or listing, (B) any conditions that would be shown by a
current survey, title, report or physical inspection and (C) zoning, building
and other similar governmental restrictions, so long as none of (A), (B) or (C)
renders the title to any Real Property unmarketable or prevents, restricts or
limits the use of any Real Property substantially as currently used.
"Person" shall mean any individual, firm, partnership, association,
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trust, corporation, joint venture, unincorporated organization, limited
liability company, governmental body or other entity.
"Proceeding" shall mean an action, suit, proceeding, hearing,
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investigation, litigation, charge, complaint, claim or demand.
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"Purchased Entity" shall mean each of AWDGP, AILLC, Appleton,
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Appleton Recycled Fibers Inc., WTA Inc., Appleton International Sales Inc.,
Appleton Papers Canada Ltd., Appleton Papers de Mexico S.A. de C.V and
PaperHub.com, Inc.
"Reference Rate" shall mean a rate per annum of ten percent (10%),
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calculated on the basis of the actual number of days elapsed in a year of 365
days.
"Securities Act" shall mean the Securities Act of 1933, as amended,
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and the rules and regulations promulgated thereunder.
"Sellers' Business" shall mean, collectively, those businesses
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carried on by Seller Parent and its Affiliates on or prior to the Closing Date
(except to the extent such businesses were carried out through the Purchased
Entities).
"Sellers' knowledge," or words of a similar import, whether
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capitalized or not, shall mean the actual present awareness of Jean-Pierre
Brice, Albert Dungate, Russell Chaplin, Rick Curtis, Luca Paveri Fontana or
James Morley.
"Subsidiary" or "Subsidiaries" of any Person shall mean any
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corporation, partnership, limited liability company, joint venture or other
legal entity (i) more than 50% of the stock or other equity or ownership
interests of which are directly or indirectly owned by such Person (either alone
or through or together with any other Subsidiary) or (ii) of which such Person
is generally entitled to elect a majority of the board of directors or other
governing body of such corporation or other legal entity.
"Tax Loss Benefit" shall mean the benefit that would be available
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against the payment of Income Taxes as a result of a Loss of a Person calculated
by assuming that such benefit would reduce Income Taxes payable at the highest
marginal federal and state corporate Income Tax rates, irrespective in any such
case of whether such benefit is actually available in
12
the calculation of Income Taxes so long as the year with respect to which the
benefit is being applied remains open to such Person at the time the applicable
Income Taxes are paid.
"Taxes" shall mean all United States and foreign federal, state,
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provincial, local and territorial income, profits, franchise, gross receipts,
payroll, sales, employment, use, property, real estate, excise, value added,
estimated, stamp, alternative and add-on minimum, environmental, withholding and
other taxes, duties or assessments, together with all interest, penalties and
additions imposed with respect to such amounts.
"Technology" shall mean the proprietary patterns, plans, designs,
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bills of material, research data, trade secrets and other proprietary know-how,
formulae, quality control and manufacturing processes, techniques, methods,
drawings, technology, manuals, data, records, procedures, research and
development records, proprietary ideas, concepts, inventions, innovations,
computer programs and related proprietary documentation, business and marketing
information; and all licenses and other rights to use any technical information
and know-how of others necessary to the conduct of the Business as presently
carried on.
2. SALE AND TRANSFER OF PARTNERSHIP INTERESTS; PURCHASE PRICE.
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2.1 Transfer and Sale of Partnership Interests. Subject to the
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satisfaction or waiver of the conditions set forth in Section 6, at the Closing
and as of the Closing Date, (i) Seller 1 shall sell, convey, assign and transfer
to Buyer 1 Seller 1's Partnership Interest for eighty-seven and one-half percent
(87.5%) of the Purchase Price, (ii) Seller 2 shall sell, convey, assign and
transfer to Buyer 2 its Partnership Interest for twelve and one-half percent
(12.5%) of the Purchase Price and (iii) Buyers shall purchase, acquire and
accept from Sellers such Partnership Interests. At the Closing, the Partnership
Interests shall be transferred to Buyers free and clear of all Liens.
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2.2 Purchase Price. The aggregate purchase price (the "Purchase Price")
-------------- --------------
for the Partnership Interests shall be (i) $990,882,564 plus (ii) the Harrisburg
----
Proceeds minus (iii) the amount of Appleton Debt on the Closing Date.
-----
2.3 Payment of Purchase Price.
-------------------------
(a) At the Closing, Buyers shall pay to Sellers in cash by wire
transfer of immediately available funds to the accounts designated by Sellers an
aggregate amount equal to (i) the Purchase Price minus (ii) the Deferred Payment
-----
(the "Cash Payment") provided, however that if the sale of the Harrisburg
------------
Facility has not been consummated prior to the Closing Date, the component of
the Purchase Price represented by the Harrisburg Proceeds shall be paid
immediately upon receipt thereof rather than at the Closing. Seller 2 shall be
deemed pursuant to this Section 2.3 to have received an amount equal to the
product of (i) the Purchase Price times (ii) one hundred twenty-five one
-----
thousandths (.125), all out of the Cash Payment; and Seller 1 shall be deemed
pursuant to this Section 2.3 to have received the balance of the Purchase Price,
including 100% of the Deferred Payment.
(b) Subject to the terms and conditions set forth on Schedule 2.3,
------------
Buyer 1 shall make a payment to Seller 1 of $320,882,564 on May 8, 2010 (the
"Deferred Payment"). Such terms and conditions are fully incorporated herein by
----------------
reference. The parties acknowledge that, as of the date of this Agreement,
Schedule 2.3 sets forth all of the terms relating to the Deferred Payment,
- ------------
including all of the relative rights and responsibilities of Buyer 1 and Seller
1 relating to the Deferred Payment.
2.4 Cash Adjustments and the Like. For the avoidance of doubt, Schedule
----------------------------- --------
2.4 sets forth a description and reconciliation of the cash payments and
- ---
adjustments being made at the Closing, including, without limitation, to take
account of the payment of the Purchase Price,
14
the completion of the Reorganization, the satisfaction of the Appleton Debt and
all of the other respective obligations of the parties hereto. By their approval
of such Schedule 2.4, the parties are hereby acknowledging that, upon Closing,
------------
all such respective payment obligations have been satisfied.
3. REPRESENTATIONS AND WARRANTIES OF SELLERS AND SELLER PARENT.
-----------------------------------------------------------
Sellers and Seller Parent, jointly and severally, represent and warrant to
Buyers that, as of the date of this Agreement:
3.1 Corporate Existence of Sellers. Each of Sellers and Seller Parent is a
------------------------------
corporation duly incorporated, validly existing and in good standing under the
laws of the jurisdiction of its incorporation and has all necessary corporate
power and authority to enter into this Agreement and all agreements, documents
and instruments required to be delivered hereby (the "Ancillary Agreements"), to
--------------------
carry out its obligations hereunder and thereunder and to consummate the
transactions contemplated hereby and thereby. Neither Sellers nor Seller Parent
have taken any actions or instituted any proceedings relating to their
liquidation, administration, receivership, voluntary arrangement, striking of or
dissolution.
3.2 Corporate Authority of Sellers. This Agreement and the Ancillary
------------------------------
Agreements and the consummation of all of the transactions provided for herein
and therein have been or will be duly authorized by all requisite corporate,
shareholder, or other action prior to Closing, and Sellers and Seller Parent
have full power and authority to execute and deliver this Agreement and the
Ancillary Agreements and to perform their respective obligations hereunder and
thereunder. This Agreement and the Ancillary Agreements have been duly executed
and delivered by Sellers and Seller Parent and constitute valid and legally
binding obligations of Sellers and Seller Parent, enforceable in accordance with
their respective terms. Except as set
15
forth on Schedule 3.2, the execution and delivery of this Agreement and the
------------
Ancillary Agreements by Sellers and Seller Parent and the consummation by
Sellers and Seller Parent of the transactions contemplated hereby and thereby
will not violate or conflict with any provision of the respective articles of
incorporation or by-laws or other comparable organizational document of Sellers,
Seller Parent or any Purchased Entity, or result in any breach or constitute any
default under any contract, indenture, mortgage, lease, note or other agreement
or instrument to which any Seller, Seller Parent or any Purchased Entity is
subject or is a party, except for any such violation, conflict, breach or
default which would not have a Material Adverse Effect.
3.3 Corporate Existence of Purchased Entities. Except as set forth on
-----------------------------------------
Schedule 3.3, each of the Purchased Entities is a corporation, limited liability
- ------------
company or general partnership, as the case may be, duly organized and validly
existing and in good standing under the laws of the jurisdiction of its
incorporation, formation or other organization and each of said entities has the
requisite power and authority to own, lease and operate its properties and
assets and to carry on its business operations as the same are now being
conducted, except where the failure to be so organized and validly existing and
in good standing would not have a Material Adverse Effect. Each of the Purchased
Entities is duly authorized, qualified or licensed to do business and is in good
standing in every jurisdiction except where the failure to be so authorized,
qualified, or licensed would not have a Material Adverse Effect.
3.4 Capitalization of AWDGP and AILLC.
---------------------------------
(a) Sellers have good and valid title to, and are the sole record and
beneficial owners of, the Partnership Interests and all of the Partnership
Interests are owned by Sellers free and clear of all Liens. Seller 1 owns an
eighty-seven and one-half percent (87.5%) Partnership Interest and Seller 2 owns
a twelve and one-half percent (12.5%) Partnership Interest.
16
(b) AWDGP has good and valid title to, and is the sole record and
beneficial owner of, all of the membership interests of AILLC, and all of such
membership interests are owned by AWDGP free and clear of all Liens.
(c) There are no outstanding options, warrants, agreements or other
rights of any kind relating to the sale or issuance of additional partnership,
membership or other equity interests or securities in, or of any securities
convertible into, exchangeable for or evidencing the right to purchase any
additional partnership, membership or other ownership interests in, AWDGP or
AILLC.
3.5 Capitalization of Purchased Entities (other than AWDGP and AILLC). All
-----------------------------------------------------------------
of the outstanding shares of capital stock or other equity interests of each of
the Purchased Entities (other than AWDGP and AILLC) which are held by another
Purchased Entity have been validly issued, have been fully paid, are
nonassessable (except as provided in Section 180.0622(2)(b) of the Wisconsin
Business Corporation Law, or any successor provision thereto and the cases
decided thereunder) and are owned by AWDGP, AILLC or one or more of their direct
or indirect Subsidiaries, free and clear of all Liens. Schedule 3.5 sets forth
------------
for each of the Purchased Entities the authorized capital stock or other equity
interest, the number of shares of outstanding capital stock or other equity
interest, the record number of shares of such outstanding capital stock or other
equity interest owned by each owner thereof and the name of each such record
owner. There are no outstanding options, warrants, agreements or other rights of
any kind relating to the sale or issuance of additional capital stock or other
equity interests in, or of any securities convertible into, exchangeable for or
evidencing the right to purchase any additional capital stock or other ownership
interests in any of the Purchased Entities.
17
3.6 Governmental Approvals; Consents.
--------------------------------
(a) None of Sellers, Seller Parent or the Purchased Entities is
subject to any order, judgment or decree, nor to Sellers' knowledge, is any such
order, judgement or decree threatened, which would prevent the consummation of
the transactions contemplated hereby.
(b) No claim, legal action, suit, arbitration, governmental
investigation, action or other legal or administrative proceeding is pending or,
to Sellers' knowledge, threatened against Sellers, Seller Parent or any
Purchased Entity which would enjoin or delay the transactions contemplated
hereby. Except as set forth on Schedule 3.6 hereto, no consent, approval, order
-------------
or authorization of, license or permit from, notice to or registration,
declaration or filing with, any governmental authority or entity, domestic or
foreign, or other Person, is or has been required on the part of Sellers, Seller
Parent or the Purchased Entities in connection with the execution and delivery
of this Agreement or the consummation of the transactions contemplated hereby,
except for such consents, approvals, orders or authorizations of, licenses or
permits, filings or notices the failure of which to obtain or make would not
have a Material Adverse Effect or which have been obtained (the "Seller Required
---------------
Consents").
- --------
3.7 Financial Statements. Schedule 3.7 sets forth a copy of the audited
-------------------- ------------
consolidated balance sheet of AWDGP and its Subsidiaries as at December 30,
2000, and the related audited statement of income and cash flows for the fiscal
year ended on such date (the "Financial Statements"). The Financial Statements
--------------------
present fairly the financial position and results of operations of AWDGP and its
Subsidiaries as at such date or, as the case may be, for the periods covered
thereby and have been prepared in accordance with GAAP, as applied on a
consistent basis in accordance with the internal accounting practices of
Appleton and its Subsidiaries.
18
3.8 Real and Personal Properties.
----------------------------
(a) One or more of the Purchased Entities has good and marketable fee
simple title to, or a valid and binding leasehold interest in, the real or
personal property pertaining to the Business, free and clear of all Liens,
except for Permitted Liens.
(b) Schedule 3.8 contains a list of all of the Purchased Entities'
------------
rights, title and interest in real property used by the Purchased Entities (the
"Owned Real Property"), all material leases of real property used by the
-------------------
Purchased Entities (the "Leased Real Property" and together with Owned Real
--------------------
Property, the "Real Property"), including all buildings, structures and other
-------------
improvements situated thereon (individually, a "Facility" and, collectively, the
--------
"Facilities"). Except as set forth on Schedule 3.8 and except as would not
---------- ------------
individually or in the aggregate have a Material Adverse Effect, there are no
Persons in possession of any portion of the Real Property as lessees, tenants at
sufferance or trespassers other than the Purchased Entities. Except as set forth
on Schedule 3.8, the Sellers have no knowledge that the location, construction,
------------
occupancy, operation or use of any of the Facilities located on any of the Real
Property violates any agreement, easement, restrictive covenant or deed
restriction or any other governmental laws, orders, rules or regulations except
for such violations or restrictions which would not have a Material Adverse
Effect.
(c) Except as provided on Schedule 3.8, to Sellers' knowledge, there
------------
are no planned or commenced public improvements that may result in special
assessments or otherwise materially affect the Real Property or the present use
of the Real Property.
(d) Except as provided on Schedule 3.8, to Sellers' knowledge, there
------------
are no completed or pending reassessments of the Real Property for property tax
purposes.
19
(e) Except as provided on Schedule 3.8, to Sellers' knowledge, no
------------
portion of the Real Property is in a 100-year flood plain, a wetland or a
shoreland zoning area under local, state or federal regulations.
(f) Except as provided on Schedule 3.8, to Sellers' knowledge, there
------------
is no pending or threatened rezoning, condemnation or conveyance in lieu of
condemnation with respect to any portion of the Real Property.
3.9 Contracts.
---------
(a) Except as otherwise disclosed on Schedule 3.9, and except for such
------------
commitments, contracts, indentures and agreements, written or oral, as would
reasonably be expected to be entered into in the ordinary course by a business
engaged in business activities similar to the Business, there is no outstanding
commitment, contract, indenture or agreement to which any of the Purchased
Entities is a party to or by which any of the Purchased Entities is bound
including, without limitation, personal property leases, real property leases,
purchase orders for inventory, long term supply agreements, sales agreements,
distributorship or marketing agreements, notes, guarantees, mortgages, loan
agreements, collective bargaining agreements, service or maintenance agreements,
broker agreements, sales representative agreements, license agreements,
technology agreements and royalty agreements (hereinafter "Contracts") that (i)
---------
involves payment of more than One Million Dollars ($1,000,000) in the aggregate
by or to any Purchased Entity and (ii) is not by its terms terminable, without
penalty, on ninety (90) days' or less notice except for Contracts the loss of
which would not reasonably be expected to have a Material Adverse Effect.
Contracts disclosed on Schedule 3.9 are hereafter referred to as the "Disclosed
------------ ---------
Contracts."
- ---------
20
(b) Each Disclosed Contract to which a Purchased Entity is a party is
valid and in full force and effect according to its terms except where such
failure to be valid or in full force or effect would not have a Material Adverse
Effect. The Purchased Entities and, to Sellers' knowledge, the other parties
thereto are not in default or breach under any such Disclosed Contract except
where such default or breach would not have a Material Adverse Effect. There are
no pending or, to Seller's knowledge, threatened breaches of or claims affecting
any Disclosed Contract except where such breach or claim would not have a
Material Adverse Effect.
3.10 Litigation; Orders. Except as set forth on Schedule 3.10, none of the
------------------ -------------
Purchased Entities is a party to any judicial, administrative or arbitral
proceedings or is the subject of any investigation by any governmental
authority, which proceedings or investigations are pending or, to Sellers'
knowledge, threatened which would, if adversely determined, have a Material
Adverse Effect. Except as set forth on Schedule 3.10, none of the Purchased
-------------
Entities is in default under any judgment, order, injunction or decree of any
court or other governmental authority relating to the Purchased Entities except
for such defaults, judgments, orders, injunctions of decrees which would not
have a Material Adverse Effect.
3.11 Intangible Property Rights.
--------------------------
(a) Except as set forth on Schedule 3.11(a) and except as would not
----------------
have a Material Adverse Effect, (i) the Purchased Entities own, are licensed to
use or otherwise have the full right to use all unexpired domestic and foreign
patents and patent applications necessary to the conduct of the business of the
Purchased Entities as presently carried on, as well as all material reissues,
divisionals, continuations and continuation-in-part applications and any patents
thereon, and all license agreements and other agreements which relate to
inventions and
21
discoveries and any patent applications and patents thereon, as well as
presently-existing improvements therein (the "Patent Rights") and the Technology
-------------
free and clear of all Liens; (ii) there are no pending or, to Sellers'
knowledge, threatened claims challenging the validity or ownership of such
Patent Rights or Technology or the Purchased Entities' right to use the Patent
Rights or Technology; (iii) the issued patents under such Patent Rights that are
owned by a Purchased Entity are valid and subsisting and, to Sellers' knowledge,
none of the claims of such patents is now being infringed by others; (iv) there
are no licenses or sublicense agreements now in effect regarding the Purchased
Entities' or any third party's use of such Patent Rights or Technology; and (v)
none of the Purchased Entities is infringing any U.S. or foreign patent owned by
third parties in the current operation of its business and no claim is now
pending or, to Sellers' knowledge, is threatened to such effect.
(b) Schedule 3.11(b) sets forth a complete and correct list and
----------------
description of all trademarks, trademark registrations, trademark applications
and all trade names, all licenses and other rights to use trademarks owned by
others, and any material trade dress associated therewith, that are used by the
Purchased Entities in connection with the Business (the "Trademark Rights").
-----------------
Except as set forth on Schedule 3.11(b) and except as would not otherwise have a
----------------
Material Adverse Effect, (i) the Purchased Entities own, are licensed to use or
otherwise have the full right to use the Trademark Rights; (ii) all Trademark
Rights registered in the name of a Purchased Entity are valid and subsisting,
free and clear of any encumbrances or rights of third parties which would
restrict Buyers' right to use such registered Trademark Rights; (iii) no claim
by third parties with regard to the use by the Purchased Entities of any of the
Trademark Rights is pending or has been made or threatened and none of the
Trademark
22
Rights is being infringed by others, and (iv) there are no license or sublicense
agreements now in effect regarding the use of any Trademark Rights by third
parties.
(c) Except as disclosed on Schedule 3.11(c) and except for those
----------------
claims that would not have a Material Adverse Effect, there are no pending or,
to Sellers' knowledge, threatened claims by or against any Purchased Entity with
respect to such copyrights, copyright registrations, copyright applications
(pertaining thereto), licenses or other rights to use the copyrights of others
necessary for the conduct of the business of the Purchased Entities as presently
carried on, and there are no license or sublicense agreements now in effect
regarding the use of such copyrights by any third parties.
3.12 Tax Matters. Except as set forth on Schedule 3.12, no Purchased
----------- -------------
Entity is a party to or bound by (nor will any of them become a party to or
bound by prior to the Closing Date) any tax indemnity, tax sharing, or tax
allocation agreement pursuant to which it will have any obligation to make any
payments after the Closing on account of periods beginning after the Closing.
3.13 Employment and Benefits.
-----------------------
(a) Labor Controversies. Except as described on Schedule 3.13(a)
----------------
and except as would not have a Material Adverse Effect, (i) the Purchased
Entities are in compliance in all respects with all applicable laws relating to
employment and employment practices, terms and conditions of employment and
wages and hours, (ii) there is no labor strike, dispute, slowdown or work
stoppage actually pending or, to Sellers' knowledge, threatened against the
Purchased Entities, (iii) the Purchased Entities have not experienced any strike
or work stoppage within the past three (3) years, and (iv) no Purchased Entity
is a party to, or subject to, a collective
23
bargaining agreement, and no collective bargaining agreement relating to
employees of the Purchased Entities is currently being negotiated.
(b) Employee Benefit Plans.
----------------------
(i) Set forth on Schedule 3.13 (b)(i) is a list of all
--------------------
Benefit Plans maintained by the Purchased Entities and any Benefit
Plan maintained by the Purchased Entities and terminated within the
last five (5) years. Except as set forth on Schedule 3.13(b)(i), there
-------------------
are no formal plans or commitments, whether or not legally binding, to
create any additional Benefit Plan or to modify or change any existing
Benefit Plan that would affect any employee or former employee of any
Purchased Entity.
(ii) Except as described on Schedule 3.13(b)(ii), each
--------------------
Benefit Plan has been established and administered in accordance with
its terms and in compliance with all applicable laws and regulations,
including the Code and ERISA, except where a failure to do so would
not have a Material Adverse Effect.
(iii) Except as described on Schedule 3.13(b)(iii), no
---------------------
"reportable event" (as such term is used in Section 4043 of ERISA),
"prohibited transaction" (as such term is used in Section 406 of ERISA
and Section 4975 of the Code) or "accumulated funding deficiency" (as
such term is used in Section 412 or 4971 of the Code) has occurred
with respect to any Benefit Plan which would have a Material Adverse
Effect.
(iv) All amounts which Sellers, the Purchased Entities, or
any of their Affiliates are required to pay under the terms of each
Benefit Plan with respect to the most recent plan year thereof ended
prior to the date of this Agreement have
24
been timely paid in full and all amounts required to have been
actually paid under the terms of each Benefit Plan prior to the
Closing Date will be paid on or before the Closing Date.
(v) With respect to each Benefit Plan which is an employee
pension benefit plan (as defined in Section 3(2) of ERISA): (A) to
the extent such Benefit Plan is intended to qualify under Section
401(a) of the Code, such Benefit Plan is so qualified and Sellers or
the Purchased Entities have received a current favorable
determination letter to such effect from the Internal Revenue Service
or are properly relying on the qualification of a standardized
prototype plan which Sellers or the Purchased Entities have duly
adopted; (B) the provisions of each such Benefit Plan are, and its
operation has been and is, in compliance with ERISA and the Code,
except where such operation or failure to so comply would not have a
Material Adverse Effect; (C) Sellers, the Purchased Entities and
their Affiliates are in compliance with ERISA and the Code, including
ERISA's fiduciary and prohibited transaction rules, participation and
vesting provisions, reporting and disclosure provisions, and funding
requirements, except where any such failure to comply would not have
a Material Adverse Effect; and (D) none of Sellers, the Purchased
Entities or any of their Affiliates, any Benefit Plan or any trust
created thereunder, or any trustee or administrator thereof has
engaged in a transaction in connection with Sellers, the Purchased
Entities or their Affiliates, or any trustee or administrator of any
Benefit Plan or any such trust, or any party dealing with any Benefit
Plan or any such trust, which could be subject to a civil penalty
assessed pursuant to Section 502(i) or 502(1) of ERISA, except as
would
25
not have a Material Adverse Effect. With respect to each Benefit Plan
which is an employee welfare benefit plan (as defined in Section 3(1)
of ERISA): (I) the provisions of such Benefit Plan are, and its
operation has been and is, in compliance with ERISA, the Code and the
Comprehensive Omnibus Budget Reconciliation Act of 1985, as amended;
and (II) Sellers, the Purchased Entities and their Affiliates are in
compliance with ERISA and the Code, including ERISA's fiduciary and
prohibited transaction rules and reporting and disclosure
requirements, except where any failure to be in compliance would not
have a Material Adverse Effect. No Benefit Plan which is an employee
pension benefit plan or employee welfare benefit plan is currently
under audit or review by the U.S. Department of Labor, the Internal
Revenue Service, the Pension Benefit Guaranty Corporation or any
other federal or state governmental authority, and no such action is
contemplated or under consideration.
(vi) No action, claim (except those routinely submitted in the
ordinary course of plan administration), litigation or administrative
or other proceeding involving any Benefit Plan is pending or, to
Sellers' knowledge, threatened which would have a Material Adverse
Effect.
(vii) Except as described on Schedule 3.13(b)(vii), no Purchased
---------------------
Entity or any of its Affiliates has contributed to any "multiemployer
plan" (as defined in Section 3(37) of ERISA) and no Purchased Entity
or any entity with which any Purchased Entity may be treated as a
single employer under Section 414 of the Code has incurred any
withdrawal liability which remains unsatisfied in an amount which
would have a Material Adverse Effect.
26
(viii) Except as described on Schedule 3.13(b)(viii), no Benefit
---------------------
Plan provides health or other welfare benefits to retirees, nor have
Sellers or any Purchased Entity promised or incurred any liability in
connection with any such benefit.
(ix) Notwithstanding any provision of this Section 3.13(b) to
the contrary, no representation or warranty is provided with respect
to the ESOP.
3.14 Compliance with Laws. Except as disclosed on Schedule 3.14 and
-------------------- -------------
except for those failures to have, to be in full force and effect, to file,
retain and maintain and to comply that, in each case, would not have a Material
Adverse Effect, (a) the Purchased Entities have all Permits required by any
United States or foreign, federal, state, provincial, municipal or other local
governmental or regulatory body for the operation of the Business and the use of
its properties as presently operated or used; (b) all such Permits are in full
force and effect and no action, claim or proceeding is pending or, to Sellers'
knowledge, threatened to suspend, revoke, revise, limit, restrict or terminate
any of such Permits or declare any such Permit invalid; (c) the Purchased
Entities have filed all necessary reports and maintained and retained all
necessary records pertaining to such Permits; and (d) each of the Purchased
Entities has otherwise complied with all of the laws, ordinances, regulations
and orders applicable to their existence, financial condition, operations or
properties; and none of Sellers, Seller Parent or any of their respective
Affiliates (other than a Purchased Entity) has received any notice to the
contrary.
3.15 Finders; Brokers. Except (a) for fees and expenses payable to Goldman
----------------
Sachs International, which shall be Seller Parent's sole responsibility and (b)
as set forth in Section 5.16, neither Seller Parent nor either Seller is party
to any agreement with any finder or
27
broker or in any way obligated to any finder or broker for any commissions, fees
or expenses, in connection with the origin, negotiation, execution or
performance of this Agreement.
3.16 Environmental Matters.
---------------------
(a) Except with respect to matters disclosed or referred to on
Schedule 3.16:
- -------------
(i) The assets and the Business of the Purchased Entities are
operated and conducted in compliance with all Environmental Laws and
the Purchased Entities currently hold, have held in the past and are
in compliance with all permits, licenses, authorizations, and/or
other approvals (collectively the "Environmental Permits") required
---------------------
under Environmental Laws for the use, occupancy and operation of the
assets of the Purchased Entities and the operations and conduct of
the Business, and all prior instances of non-compliance with
Environmental Laws and Environmental Permits have been fully and
finally resolved and corrected except, where the failure to comply
with Environmental Laws and Environmental Permits or to hold
Environmental Permits either now or in the past would not have a
Material Adverse Effect.
(ii) There are no outstanding proceedings, and Sellers have no
knowledge of any investigation or claim by any Person, alleging any
liability under, or noncompliance with, any Environmental Law or
Environmental Permit arising from or relating to the assets of the
Purchased Entities or the operations and conduct of the Business,
except for such matters that would not have a Material Adverse Effect
or that have been fully and finally resolved and concluded.
28
(iii) There are no outstanding proceedings, directives or
orders, nor are there any outstanding written claims, demands,
investigations or other actions pending, or to Sellers' knowledge,
threatened by any Person, against the Purchased Entities for the
cleanup, removal, investigation, monitoring, remediation or other
response action or seeking damages, contribution, indemnification,
cost recovery, compensation, or injunctive relief resulting from the
presence or release into the environment of any Hazardous Substance
(collectively "Environmental Claims") and no Environmental Claim is
--------------------
pending or to Sellers' knowledge threatened, nor, to Seller's
knowledge, has any investigation begun by any Person alleging or
seeking to make an Environmental Claim against or impose
environmental liability on the Purchased Entities except, in any such
case, any such Environmental Claim as would not have a Material
Adverse Effect.
(iv) The Purchased Entities have not entered into any
agreement with any governmental authority to correct noncompliance
or alleged noncompliance with any Environmental Law or Environmental
Permit, or to investigate or remediate the presence or alleged
presence of any Hazardous Substances, except for such agreements
that have been fully and finally resolved and completed and that are
no longer binding upon the Purchased Entities.
(v) No Hazardous Substances have been released into the
environment on or from the Purchased Entities' assets or property
which require any notification or response in accordance with
Environmental Laws and all instances
29
of non-compliance have been fully and finally resolved and corrected
except where any such non-compliance would not have a Material
Adverse Effect.
(b) Notwithstanding the generality of any other representations
and warranties in this Agreement, the representations and warranties in this
Section 3.16 shall be deemed the only representations and warranties in this
Agreement with respect to matters directly or indirectly relating to, or arising
out of, Environmental Laws, Environmental Permits or Hazardous Substances;
provided however, that this Section 3.16 shall not affect the obligations of
- -------- -------
Seller Parent under the Fox River Indemnification Agreements.
3.17 No Other Representations or Warranties. Except for the
--------------------------------------
representations and warranties contained in this Section 3, none of Seller
Parent, either Seller or any other Person makes any other express or implied
representation or warranty on behalf of Sellers, including, without limitation,
as to the probable success or profitability of the ownership, use or operations
of the Business after the Closing.
3.18 Undisclosed Commitments or Liabilities. Except as set forth on
--------------------------------------
Schedule 3.18, there are no commitments, liabilities or obligations relating to
- -------------
any of the Purchased Entities, whether accrued, absolute, contingent or
otherwise, for which specific and adequate provisions have not been made on the
Financial Statements or disclosed pursuant to this Agreement (including the
Schedules hereto), except those (a) incurred in or as a result of the ordinary
course of business since December 30, 2000, (b) accrued on the internal
financial statements of the Purchased Entities as in the possession of Buyers or
(c) which individually would result in a monetary liability to the Purchased
Entities of $250,000 or less.
3.19 Warranties True and Correct. No warranty or representation by Sellers
---------------------------
or Seller Parent contained in this Agreement, the Exhibits or Schedules attached
hereto or any
30
Ancillary Agreement contains or will contain any untrue statement of fact which
makes the warranties or representations herein or therein contained misleading.
4. REPRESENTATIONS AND WARRANTIES OF BUYERS.
----------------------------------------
Buyers represent and warrant to Sellers that, as of the date of this
Agreement:
4.1 Corporate Existence. Each of Buyers is a corporation or limited
-------------------
liability company, as the case may be, duly organized, and validly existing and
in good standing under the laws of the jurisdiction of its incorporation,
formation or other organization and has all necessary power and authority
(including full power and authority as a corporation or limited liability
company, as the case may be) to enter into this Agreement and the Ancillary
Agreements, to carry out its obligations hereunder and thereunder and to
consummate the transactions contemplated hereby and thereby.
4.2 Corporate Authority. This Agreement and the Ancillary Agreements and
-------------------
the consummation of all of the transactions provided for herein and therein have
been or will be duly authorized by all requisite corporate, shareholder, member
or other action prior to Closing, and Buyers have full power and authority to
execute and deliver this Agreement and the Ancillary Agreements and to perform
their respective obligations hereunder and thereunder. This Agreement and the
Ancillary Agreements have been duly executed and delivered by Buyers and
constitute valid and legally binding obligations of Buyers, enforceable in
accordance with their respective terms. The execution and delivery of this
Agreement and the Ancillary Agreements by Buyers and the consummation by Buyers
of the transactions contemplated hereby and thereby will not violate or conflict
with any provision of the respective articles of incorporation, by-laws,
operating agreement or other governing agreement of Buyers, or result in any
breach or constitute any default under any material contract, indenture,
mortgage, lease, note or other material agreement or instrument to which either
Buyer is a party or otherwise subject.
31
4.3 Governmental Approvals; Consents.
--------------------------------
(a) No Buyer is subject to any order, judgment or decree, and, to
Buyers' knowledge, no order, judgement or decree is threatened, which would
prevent the consummation of the transactions contemplated hereby.
(b) No claim, legal action, suit, arbitration, governmental
investigation, action, or other legal or administrative proceeding is pending
or, to Buyers' knowledge, threatened against Buyers which would enjoin or delay
the transactions contemplated hereby. Except as set forth on Schedule 4.3, no
------------
consent, approval, order or authorization of, license or permit from, notice to
or registration, declaration or filing with, any governmental authority or
entity, domestic or foreign, or other Person, is or has been required on the
part of any Buyer in connection with the execution and delivery of this
Agreement or the consummation of the transactions contemplated hereby (the
"Buyer Required Consents").
-----------------------
4.4 Finders; Brokers. Except as set forth in Section 5.16, no Buyer is a
----------------
party to any agreement with any finder or broker, or in any way obligated to any
finder or broker for any commissions, fees or expenses, in connection with the
origin, negotiation, execution or performance of this Agreement.
4.5 Purchase for Investment. Each Buyer is aware that the Partnership
-----------------------
Interests being acquired pursuant to the transactions contemplated hereby are
not registered under the Securities Act, or under any state or foreign
securities laws. No Buyer is an underwriter, as such term is defined under the
Securities Act, and each Buyer is purchasing such Partnership Interests solely
for investment, with no present intention to distribute any such Partnership
Interests to any Person, and no Buyer will sell or otherwise dispose of its
Partnership Interests except in
32
compliance with the registration requirements or exemption provisions under the
Securities Act and the rules and regulations promulgated thereunder, or any
other applicable securities laws.
4.6 No Other Representations or Warranties. Except for the
--------------------------------------
representations and warranties contained in this Section 4, neither Buyer nor
any other Person makes any other express or implied representation or warranty
on behalf of either Buyer.
4.7 Due Diligence. Buyers have conducted such investigations of the
-------------
Business and the Purchased Entities as they deem appropriate in connection with
the execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby. Further, and without limiting the foregoing,
Buyers acknowledge that they have had full access to all information respecting
the Business and the Purchased Entities; provided, however, that the obligations
of Sellers and Seller Parent to provide indemnification under Sections 5.9 and 8
shall not be affected by the representation made in this Section 4.7.
4.8 The ESOP. At the Closing, the ESOP and its related trust will be duly
--------
formed and a component of a plan duly qualified under Section 401(a) of the
Code. The ESOP is "controlled" (for purposes of Rule 802.35 promulgated under
the HSR Act) by Appleton.
5. AGREEMENTS OF ALL PARTIES.
-------------------------
5.1 Operation of the Business. Except for the Reorganization and as
-------------------------
otherwise contemplated by this Agreement or as disclosed on Schedule 5.1 (such
------------
exceptions and disclosed matters herein referred to as "Permitted
---------
Transactions"), Sellers covenant that until the Closing Date they shall take no
- ------------
affirmative action to change the past practices and operation of the Business
and shall not, without the prior written approval of Buyers or except as
otherwise contemplated by this Agreement or constituting a Permitted
Transaction, direct the Purchased Entities or their officers to take any of the
following actions (excluding any such actions as are
33
consistent with the existing business plans of the Purchased Entities or as
are a consequence of or related to a Permitted Transaction):
(a) with respect to any Purchased Entity, amend its Articles of
Incorporation, By-laws, partnership agreement or other comparable organizational
document, or issue or agree to issue any additional partnership interests,
shares of capital stock of any class or series, or other ownership interests or
any securities convertible into or exchangeable for partnership interests,
shares of capital stock of any class or series or other ownership interests, or
issue any options, warrants or other rights to acquire any partnership
interests, shares of capital stock of any class or series or other ownership
interests;
(b) sell, lease, transfer or otherwise dispose of or encumber any of
their properties or assets pertaining to the Business, other than (i) in the
ordinary course of business consistent with past practices, and (ii) transfers
by one Purchased Entity to another Purchased Entity;
(c) declare or pay any dividend or distribution in respect of the equity
securities of any Purchased Entity, except that the Harrisburg Proceeds may be
so distributed at the election of Seller Parent, in which case the Purchase
Price shall be reduced by the amount of such dividend or distribution;
(d) incur, assume or guarantee any indebtedness for borrowed money other
than (i) purchase money borrowings, (ii) indebtedness for borrowed money
incurred in the ordinary course of business, (iii) refunding of existing
indebtedness and (iv) indebtedness to Sellers or an Affiliate of Sellers;
(e) make any change in the accounting principles or practices reflected
in the Financial Statements or in the methods of applying such principles or
practices; or
34
(f) agree, whether in writing or otherwise, to do any of the
foregoing.
5.2 Mutual Cooperation; No Inconsistent Action.
------------------------------------------
(a) Subject to the terms and conditions hereof, Sellers and Buyers
agree to use reasonable efforts to take, or cause to be taken, all actions and
to do, or cause to be done, all things necessary, proper or advisable to
consummate and make effective the transactions contemplated by this Agreement.
Sellers and Buyers shall cooperate fully with each other to the extent
reasonable in connection with the foregoing.
(b) Without limiting the generality of the foregoing, Sellers and
Buyers shall timely and promptly make all filings which may be required by each
of them in connection with the consummation of the transactions contemplated
hereby. Each party shall furnish to each other such necessary information and
assistance as the other party may reasonably request in connection with the
preparation of any necessary filings or submissions by it to any U.S. or foreign
governmental agency. To the extent directly relating to the transactions
contemplated hereby and not involving non-public information about the other
operations of such party, each party shall provide the other party the
opportunity to make copies of all correspondence, filings or communications (or
memoranda setting forth the substance thereof) between such party or its
representatives, on the one hand, and the United States Federal Trade
Commission, the Antitrust Division of the United States Department of Justice or
any similar foreign governmental agency or members of their respective staffs,
on the other hand, with respect to this Agreement or transactions contemplated
hereby.
(c) Other than to the extent applicable law expressly requires
Sellers, Seller Parent or any of their respective Affiliates (other than a
Purchased Entity) to obtain any license, permit, consent, approval,
authorization or order of any foreign governmental authority or to
35
make any registration or filing with any foreign governmental authority,
Buyers shall be responsible for making all filings and giving all notices
relating to, and otherwise pursuing all licenses, permits, consents, approvals,
authorizations and orders of foreign governmental authorities and making all
registrations and filings with foreign governmental authorities (collectively,
the "Foreign Governmental Consents"), which are required in connection with the
-----------------------------
transactions contemplated hereby and shall provide a copy of any such filings or
notices to Sellers. Buyers shall be responsible for making or giving all Foreign
Governmental Consents required to be made or given subsequent to the Closing
Date to the extent directly related to the operation of the Business. In
connection with and as a condition to Buyers' obligations under the preceding
sentence, Sellers shall fully cooperate with and assist Buyers in identifying
and obtaining all such licenses, permits, consents, approvals, authorizations or
orders and in making all such registrations and filings.
(d) Each of Sellers and Buyers shall notify and keep the other advised
as to any litigation or administrative proceeding pending and known to such
party, or to its knowledge threatened, which challenges the transactions
contemplated hereby. Sellers and Buyers shall not take any action inconsistent
with their obligations under this Agreement or which would materially hinder or
delay the consummation of the transactions contemplated by this Agreement.
(e) Sellers and Buyers shall do or procure to be done all such further
acts and things, and execute or procure the execution of all such other
documents, as such other party may from time to time reasonably require, whether
on or after Closing, for the purpose of giving to such other party the full
benefit of all the provisions of this Agreement.
36
5.3 Public Disclosures. Prior to the Closing Date, no party to this
------------------
Agreement shall (except for (a) presentations made to analysts or investors
concerning the transactions contemplated herein, (b) disclosures made to the
employees of the Purchased Entities or their spouses or financial advisors or
customers of the Purchased Entities, (c) disclosures made in connection with any
necessary filings or submissions by it to any U.S. or foreign governmental
agency, (d) disclosures made to the United States Securities and Exchange
Commission, any state securities commission, the United States Department of
Labor and the Pension Benefit Guaranty Corporation in connection with this
Agreement or the transactions contemplated hereby, and (e) disclosures made to
third parties in connection with obtaining consents to this Agreement and the
transactions contemplated hereby and deemed by Buyers to be necessary or
appropriate; provided that any disclosure described in clause (c) or (d) that
--------
the Buyers wish to make shall be provided to Sellers for their review and
reasonable approval prior to the making thereof) issue any press release or make
any other public disclosures concerning this transaction or the contents of this
Agreement without the prior written consent of the other party, which consent
shall not be unreasonably withheld or delayed. The parties hereto acknowledge
and agree that mutually agreed-upon internal announcements shall be made upon
execution of this Agreement and at Closing. Notwithstanding the above, nothing
in this Section 5.3 shall preclude any party (or Person controlling such party)
from making disclosures required by law, rule or regulation (of any applicable
stock or securities exchange or otherwise) or necessary and proper in
conjunction with the filing of any tax return or other document required to be
filed with any federal, state or local governmental body, authority or agency;
provided that the party required to make any such release or statement shall
- --------
allow the other party reasonable time to comment on such release or statement
in advance of such issuance.
37
5.4 Access to Records and Personnel.
-------------------------------
(a) The parties shall, and Buyers shall cause the Purchased Entities
to, retain the books, records, documents, instruments, accounts, correspondence,
writings, evidences of title and other papers relating to the operation of the
Business or the Excluded Operations prior to the Closing Date and in their
possession (the "Books and Records") for seven (7) years or for such longer
-----------------
period as may be required by law or any applicable court order.
(b) To the extent permitted by anti-trust and other applicable laws,
the parties shall allow each other, their Affiliates as of the date hereof and
any successor to their respective businesses or assets (the "Eligible Parties")
----------------
and Buyers shall cause the Purchased Entities to allow Sellers and their
respective Eligible Parties, reasonable access to such Books and Records, and to
personnel having knowledge of the whereabouts and/or contents of such Books and
Records, for purposes of (i) the preparation (and, in the case of tax returns,
the examination) of the audited financial statements and tax returns of Sellers
and their Eligible Parties, Buyers or the Purchased Entities, (ii) the defense
or conduct of litigation (including, without limitation, disputes relating to
the Fox River Liabilities), (iii) the provision of indemnification pursuant to
Section 8 (or the contest of the obligation to provide such indemnification) and
(iv) any other matters requested by a party (subject to the consent of the party
required to provide such Books and Records or personnel). Any such access to and
review of the Books and Records shall be permitted and conducted only during
normal business hours and upon reasonable notice. Each party shall be entitled
to recover its out-of-pocket costs (including, without limitation, copying costs
and a reasonable charge for employee time) incurred in providing such Books and
Records and/or personnel, except with respect to information provided by the
Purchased Entities to Sellers and their Eligible Parties in connection with the
preparation of their financial statements
38
or tax returns. The requesting party shall, and Buyers shall cause the
Purchased Entities to, hold in confidence all confidential information
identified as such by, and obtained after the Closing from, the disclosing party
or any of its officers, agents, representatives or employees; provided, however,
-------- -------
that information that (i) was in the public domain; (ii) was in fact known to
the requesting party prior to disclosure by the disclosing party or its
officers, agents, representatives or employees; (iii) becomes known to the
requesting party from or through a third party not under an obligation of
non-disclosure to the disclosing party; or (iv) any Seller, Eligible Party,
Buyer or Purchased Entity is required by law, rule or regulation (of any
applicable stock or securities exchange or otherwise) or otherwise deems
necessary and proper to disclose in connection with the filing of any tax return
or other document required to be filed with, or as required by, any governmental
authority, shall not be deemed to be confidential information. In addition, the
parties agree that confidential information shall not be used for any purpose
other than the specific purpose for which it was supplied.
5.5 Employee Relations and Benefits.
-------------------------------
(a) Continuing Business Employees. Effective as of the Closing, the
-----------------------------
Purchased Entities shall employ each active Business Employee, subject to the
rights of the Purchased Entities to terminate at-will employees and the rights
of the Purchased Entities under any contracts or other agreements relating to
the employment of Business Employees. Sellers and the Purchased Entities shall
cause all active employees of the Purchased Entities who are not Business
Employees to have their employment transferred to the Excluded Operations on or
prior to the Closing Date.
(b) Collective Bargaining Agreements. Buyers shall ensure that the
--------------------------------
Purchased Entities shall continue to comply in all material respects with their
obligations under
39
the collective bargaining agreements set forth on Schedule 5.5(b) and all other
---------------
statutory bargaining obligations.
(c) Pension Plan Transfer Agreement. Buyers shall cause the Purchased
-------------------------------
Entities to carry out their obligations in all material respects under the
Pension Plan Transfer Agreement to be entered into by and between Appleton and
Appleton Coated LLC providing for the pro rata allocation, based on the
actuarially determined accrued benefit obligations, of the assets of the
Appleton Papers Inc. Retirement Plan for Non-Bargaining Unit Employees on the
basis of the present value of liabilities.
(d) Stand-Alone Benefit Plans. Effective as of the Closing, the
-------------------------
Purchased Entities shall retain or assume all liabilities and obligations under
the Benefit Plans listed on Schedule 5.5(d) (the "Stand-Alone Benefit Plans").
--------------- -------------------------
(e) No Rights Conferred on Employees. Nothing herein, expressed or
--------------------------------
implied, shall confer upon any employee or former employee of Sellers, the
Purchased Entities or Buyers or any of their respective Affiliates (including,
without limitation, the Business Employees), any rights or remedies including,
without limitation, any right to employment or continued employment for any
specified period of any nature or kind whatsoever, under or by reason of this
Agreement.
5.6 Repayment of Appleton Debt. At the Closing, Buyers shall, on
--------------------------
behalf of the Purchased Entities, repay, or cause the Purchased Entities to
repay, all Appleton Debt (except for any Appleton Debt that Sellers and Buyers
agree may remain outstanding after the Closing), together with all interest
owing on the Appleton Debt so repaid (including, without limitation, all accrued
and unpaid Intercompany Interest). In order to give effect to the fact that the
Intercompany Debt and the Intercompany Interest represent the net of the amounts
owed by the
40
Purchased Entities, on the one hand, to Seller Parent, Sellers and their
respective Affiliates (other than the Purchased Entities), and amounts owed by
Seller Parent, Sellers and their respective Affiliates (other than the Purchased
Entities), to the Purchased Entities on the other hand, the parties agree that
either (i) such net amounts shall be paid as directed by Seller Parent, or (ii)
each of the various entities obligated on the Intercompany Debt shall pay all
amounts owed by such entity with the result of the net amounts being paid in the
aggregate.
5.7 Business Guarantees. Buyers shall, effective as of the Closing, cause
-------------------
Sellers and their Affiliates (other than the Purchased Entities) to be
irrevocably released from, and, if required, one or more of Buyers or their
respective Affiliates to be irrevocably substituted in all respects for Sellers
and Sellers' Affiliates (other than the Purchased Entities) in respect of, all
obligations of Sellers and Sellers' Affiliates (other than the Purchased
Entities) under any guarantees, indemnities, surety bonds, letters of credit or
letters of comfort provided by Sellers and Sellers' Affiliates (other than the
Purchased Entities) for the benefit of the Business identified on Schedule 5.7
------------
(collectively, the "Known Business Guarantees"). In the event there are any such
-------------------------
guarantees or the like not so identified on Schedule 5.7, Buyers shall use their
------------
best efforts to obtain releases thereof as promptly as possible upon being
notified thereof by Sellers; provided that in any and all events the applicable
Purchased Entities shall remain liable for any such underlying obligations and
shall satisfy them in accordance with their terms. Any Known Business Guarantees
or any other guarantee identified by Sellers after the date hereof are
collectively referred to as the "Business Guarantees."
-------------------
41
5.8 Tax Returns and Elections.
-------------------------
(a) Buyers agree not to make an election under Section 338 of the
Code, or other comparable provision under state, local or foreign law, unless
Sellers consent to such election in writing.
(b) Following the Closing:
(i) Buyer 1 shall cause the consolidated U.S. federal income
tax return of the AWDGP group and any combined state, local and
foreign income tax returns including Purchased Entities for any tax
year ending prior to, with or including the Closing Date (to the
extent not then filed) to be prepared and filed by the Purchased
Entity that prepared (or is preparing) the AWDGP consolidated return
for the 2000 tax year.
(ii) Buyer 1 shall cause non-combined returns for state, local
and foreign income taxes and other taxes of any Purchased Entity for
any period ending prior to, with or including the Closing Date (to the
extent not then filed) to be prepared and filed by (or on behalf of)
the relevant Purchased. For any period that includes, but does not end
with, the Closing Date, the tax year of each Purchased Entity and any
group of such entities shall be treated as ending on the Closing Date
to the extent permitted by law or administrative practice.
(iii) All tax returns referred to in this Section 5.8(b) filed
after the Closing Date with respect to any period including income
from periods prior to the Closing Date shall be prepared on a basis
consistent with the elections, accounting methods, conventions,
assumptions and principles of taxation used for the most recent tax
periods for which tax returns involving similar tax items have
42
been filed (or, if not so used within the most recent two (2) tax
years, on such basis as is determined by Seller Parent in accordance
with applicable law and in consultation with the Purchased Entity
preparing such tax return). For federal income tax purposes, items of
Purchased Entities shall, to the extent not otherwise dictated by law,
be ratably allocated between the period included in the AWDGP
consolidated return for the year 2001 and the Buyer 1 tax return for
the year 2001. Buyers shall take and shall cause the Purchased
Entities to take, and Seller Parent shall cause its Affiliates other
than Purchased Entities to take, all steps required under
Reg.(S) 1.1503-2(g) to avoid recapture of any dual consolidated
losses, whether due to the purchase and sale of the Partnership
Interests or otherwise. Nothing contained herein shall prohibit any
Purchased Entity from making any qualified Subchapter S subsidiary
elections as of, or immediately following, the Closing.
(iv) Buyer 1 shall submit to Sellers or Sellers' Tax Designee
any tax return to be prepared (or caused to be prepared) by it or any
Purchased Entity with respect to which Sellers have or may have any
liability at least thirty (30) days prior to the date on which such
tax return is due (including extensions) and shall make available to
Sellers and Sellers' Tax Designee such of its personnel and tax
records as may be requested by Sellers and Sellers' Tax Designee in
order to allow a reasonable review thereof and the bases therefor; and
Sellers or Sellers' Tax Designee shall provide Buyer 1 with any
objections thereto not less than ten (10) days prior to the date on
which such tax return is due (including extensions).
43
5.9 Tax Indemnity; Tax Refunds.
--------------------------
(a) Subject to the limitations provided herein, Sellers shall
indemnify and hold harmless Buyers and the Purchased Entities (collectively, the
"Tax Indemnified Parties") from and against any Net Income Taxes payable after
-----------------------
the Closing in respect of periods through September 30, 2001, but only (x)
following application of all available deductions, loss carry-forwards, and the
like, but only to the extent not otherwise applied in the calculation of such
Net Income Taxes (y) to the extent actually paid by the Tax Indemnified Parties
following the Closing on account of any tax period ending on or prior to the
Closing Date and (z) subject to the provisions respecting Tax Refunds set forth
in subsection (c) below; provided that such indemnity shall be reduced by the
--------
amount of any penalties arising from (A) the failure of Appleton or AWDGP to
make estimated Tax payments during 2001 prior to the Closing Date or (B) a
failure to file a Tax return on or before its due date except if such failure to
file was due to the failure of Sellers or the Tax Designee to respond within the
time period set forth in Section 5.8(b)(iv); and provided, further, that the
-------- -------
amount of Net Income Taxes for 2001 covered by the indemnity set forth in this
Section 5.9 shall be deemed to equal (aa) the aggregate Net Income Taxes for all
of 2001 through the Closing Date multiplied by (bb) a ratio of (1) 273 to (2)
-------------
the actual number of days elapsed during 2001 to and including the Closing Date
(the "2001 Taxes").
----------
(b) Notwithstanding the foregoing, the indemnification set forth in
this Section 5.9 shall not apply to, and Buyers shall remain responsible for (i)
50% of any Net Income Taxes in excess of $5,000,000 in the aggregate up to and
including $10,000,000 in the aggregate (representing a maximum amount of
$2,500,000 for which Buyer shall remain responsible); provided that the
provisions of this subsection (i) shall not apply to the 2001 Taxes,
44
and (ii) all income taxes on the AWDGP group's income due to the recapture of
its LIFO reserve(s), including both the tax on the first installment of such
income reported on the AWDGP group's final return as a C corporation and the tax
on subsequent installments of such income reported on Buyer 1's returns as an S
corporation and (iii) those amounts described in (c)(iii) below. In connection
with (ii), calculations of the Sellers' liability for Net Income Taxes for
calendar year 2001 will reflect this specific allocation of income taxes on the
income due to recapture of LIFO reserve(s), and this specific allocation of
income taxes shall be made without regard to any other terms of this Agreement.
(c) Buyers shall, and shall cause the Purchased Entities to, use their
good faith best efforts to seek and obtain refunds in respect of Income Taxes of
Appleton Holdings Inc., AWDGP and all members of their respective US
consolidated or state combined or unitary tax groups (the "Prior Taxpayers") on
---------------
account of any tax period ending on or prior to the Closing Date ("Tax Refunds"
-----------
which, for the avoidance of doubt, shall be deemed to include any refunds on
account of net operating losses with respect to the AWDGP group's final return
as a C corporation in 2001). The following shall apply in respect of any such
Tax Refunds:
(i) All Tax Refunds received or available in any year shall first
be applied against the amount of Net Income Taxes payable in such year
that are subject to indemnification pursuant to subsection (a) above.
(ii) Any Tax Refunds received or available in any year that are
not applied pursuant to subsection (i) above to reduce the amount of
Net Income Taxes payable in such year that are so subject to
indemnification ("Net Refunds") shall be applied as follows: (x) the
-----------
Net Refunds shall be paid over to Sellers within thirty (30) calendar
days after the end of such year to the extent of
45
indemnification payments previously made by Sellers pursuant to
subsection (a) above (and the amount so paid to Sellers shall be
treated as a reduction to Seller's indemnification payments hereunder
for purposes of this subsection (x) and subsection (b) above), and (y)
any excess Net Refunds shall be retained by Buyers subject to
subsection (iii) below ("Retained Refunds").
----------------
(iii) Notwithstanding subsection (a) above, Buyers shall have no
recourse for indemnification against Sellers hereunder on account of
Net Income Taxes arising following such time that Buyers shall have
obtained Retained Refunds; provided that the foregoing exception shall
apply only to the extent of the Retained Refunds that have not
previously been applied as a reduction to Sellers' indemnification
obligations under this subsection (iii).
(d) Buyers shall, at all times, keep Sellers and their designee (their
"Tax Designee") informed of the progress of the affairs of Buyers and the Prior
------------
Taxpayers related to Taxes to the extent they are relevant to the indemnity set
forth in this Section 5.9 or to Tax Refunds and will provide, within ten (10)
days of receipt or such meeting, copies of all correspondence and transcripts or
summaries of all meetings with the Internal Revenue Service or other taxation
authority relevant to the indemnity set forth in this Section 5.9 or to Tax
Refunds to Sellers and their Tax Designee. Without limiting the foregoing,
Buyers shall, within ten (10) days of receipt, notify Sellers and the Tax
Designee in writing (a "Tax Notice") following receipt by Buyers of any notice
----------
of any proposed, pending or threatened audit or examination of or assessment
against either Buyer or any Prior Taxpayer relating to matters covered by the
indemnity set forth in this Section 5.9 or any proposed, pending or threatened
denial of a Tax Refund.
46
(e) Sellers and their Tax Designee shall have the right to represent
Buyers and the Prior Taxpayers in an examination, in an administrative appeal
and/or in litigation in respect of any Tax Notice or otherwise in any contest in
respect of a matter covered by the indemnity set forth in this Section 5.9 or
related to a Tax Refund (collectively, a "Tax Contest") and to employ counsel at
-----------
Sellers' expense for such purpose. Sellers shall exercise this right by written
notice to Buyers at any time following receipt of any Tax Notice. If, and
following the date that, Sellers exercise this right, (i) Sellers have the total
right to control all aspects of any such Tax Contest, and (ii) Buyers and the
Prior Taxpayers shall be required to cooperate fully with Sellers and their Tax
Designee and their counsel, including the grant of all necessary powers of
attorney relating to such Tax Consent. Without limiting the generality of the
foregoing, Sellers shall have the right to settle any such Tax Contest (a "Tax
---
Contest Settlement"), subject to the following:
- ------------------
(i) Prior to entering into any such Tax Contest Settlement,
Sellers shall provide Buyers with prior written notice of the terms
and provisions thereof.
(ii) No such Tax Contest Settlement may be completed without the
consent of the Buyers in the event that it contains any admission of
responsibility of the Prior Taxpayers that it could reasonably be
expected to have a material effect respecting fiscal periods following
the Closing.
(f) The personnel of Buyers and the Prior Taxpayers shall have the
right of observation at Buyers' expense in any Tax Contest in which Sellers
exercise their rights to represent Buyers and the Prior Taxpayers.
(g) If Sellers do not exercise, or until they exercise, their right
to represent Buyers or the Prior Taxpayers as aforesaid, Buyers and the Prior
Taxpayers shall consult with
47
and take into account any reasonable submissions made by Sellers and their
Tax Designee in respect of any Tax Contest.
(h) No settlement, compromise or agreement in respect of any Tax
Contest shall be made without the consent of Sellers.
(i) The initial Tax Designee is Russell Chaplin or, in his absence,
Chris Gower. The address of the initial Tax Designee is the address of the
Sellers set forth in Section 13.1.
The Sellers' initial tax counsel is McDermott, Will & Emery
(specifically Lonn W. Myers or, in his absence, Jeffrey C. Wagner). The address
of the Sellers' initial tax counsel is 227 West Monroe Street, Suite 440,
Chicago, Illinois 60606.
The Sellers may change the identity of either its Tax Designee or its
tax counsel by providing notice to such effect to Buyers.
5.10 Change and Use of Names. As soon as reasonably practicable (and in any
-----------------------
event within two (2) months) after the Closing Date, Buyers shall change the
name of AWDGP to a name not including "Arjo Wiggins" and shall cause the
Purchased Entities to cease to use any written materials, including without
limitation, labels, packing materials, letterhead, advertising materials and
forms, which include the words "Arjo Wiggins"; provided, however, that Buyers
-------- -------
may, without modification, use inventory, product literature and sales
literature (but not including letterhead, business cards, invoices or the like)
in existence as of the Closing Date until the earlier of the exhaustion of such
materials or a date six (6) months from the Closing Date.
5.11 Mail Received After Closing. Following the Closing, (a) Buyers may
---------------------------
receive and open all mail addressed or directed to any Purchased Entity, (b) to
the extent that
48
such mail and the contents thereof relate to the Business, Buyers may deal with
the contents thereof in their sole discretion and (c) Buyers shall forward any
other such mail to Seller Parent.
5.12 Fox River Liability. Nothing in this Agreement shall apply or be
-------------------
construed to apply to any Fox River Liability except to the extent expressly
provided in the Fox River Indemnification Agreements.
5.13 Financing. Buyers shall keep Sellers and their representatives
---------
informed of the status of any negotiations with Bear Stearns and other potential
lenders (the "Lenders") regarding indebtedness to be incurred to finance any
-------
part of the Purchase Price or to discharge the Appleton Debt and to provide
working capital for Appleton after the Closing (the "Debt Financing"). Attached
--------------
hereto as Schedule 5.13 is a true and correct copy of a commitment letter from
-------------
Bear Stearns for the provision of part of the Debt Financing. To the Buyers'
knowledge, and subject to the terms of such commitment letter, such letter
constitutes the legal, binding and enforceable obligation of Bear Stearns and
there exists no fact or condition which would permit Bear Stearns to refuse to
provide the Debt Financing.
5.14 Reorganization. Buyers recognize that Sellers have begun, and
--------------
will continue the process of reorganization (the "Reorganization") described on
--------------
Schedule 5.14(a). The Reorganization includes, but is not limited to, the
removal of the Excluded Operations (other than PaperHub.com, Inc. and Appleton
Recycled Fibers Inc.) and all related assets from the Purchased Entities and the
sale by Appleton of its Camp Hill, Pennsylvania facility (the "Harrisburg
----------
Facility") to a third party or Seller Parent or its designee. In connection with
- --------
the Reorganization, Appleton shall bear all costs in connection with the removal
from the Harrisburg Facility (including the costs of dismantling, cleaning,
restoring, etc.) of the equipment already removed or to be removed by it from
the Harrisburg Facility. Buyers hereby expressly approve
49
the taking of each action described on Schedule 5.14(a), and agree that,
----------------
notwithstanding any provision of this Agreement to the contrary, no such action
shall constitute or give rise to a misrepresentation, breach or default by any
Seller hereunder. In addition, Buyers will cause Appleton to take such actions
respecting the sale of the Harrisburg Facility as directed by Seller Parent
provided such actions do not adversely affect Appleton.
5.15 Confidentiality.
---------------
(a) From the date hereof until the Closing, all parties shall, and
shall cause each of their respective Affiliates, agents, representatives and
employees, to treat as confidential any proprietary or secret information
relating to the Business, including, without limitation, the operations,
business plans, processes, inventions, trade secrets, customer lists, or other
work product developed by or for Appleton, whether on the premises of Appleton
or elsewhere ("Confidential Information"), except (i) to the extent that Seller
------------------------
Parent, Sellers or their respective Affiliates, agents, representatives and
employees have the right to use or disclose such Confidential Information
pursuant to existing agreements or arrangements with the Purchased Entities
which are in force and effect on the date hereof or (ii) with respect to
Confidential Information disclosed by the Buyers in the normal course of the
operation of the Business. From the date hereof until Closing, no party shall
disclose, utilize or make accessible in any manner or in any form any
Confidential Information without the prior written consent of the other parties
hereto unless (i) such information otherwise becomes generally available to the
public other than as a result of disclosure by the party seeking to make such
disclosure or (ii) upon the written advice of independent counsel, such party is
required by applicable law to disclose such information; provided, however, that
-------- -------
such party shall have previously given the other parties hereto prompt written
notice of the need to make such disclosure such that the other parties
50
hereto had adequate time to seek an appropriate protective order or other
remedy and such party shall have used reasonable efforts to cooperate with the
other parties hereto in seeking such remedy.
b) Each of Sellers, Seller Parent and Buyers shall keep the terms of
this Agreement and all related agreements strictly confidential unless the
disclosing party has received the written advice of independent counsel that
disclosure of such terms is required by any statute, regulation, rule,
injunction, judgment, order, decree, ruling, charge or other requirement of any
governmental authority or securities exchange to which Appleton or any of
Sellers, Seller Parent or any of its Affiliates or Buyers is subject; provided
--------
that prior to such disclosure, the disclosing party promptly advises and
consults with the non-disclosing party or parties concerning the information it
proposes to disclose; provided, further, that (i) such information may be
-------- -------
confidentially disclosed by Sellers or Buyers to their respective Affiliates,
directors, officers, employees, agents, accountants, lawyers, financial advisors
and other representatives which have a need to know in connection with the
transactions contemplated hereby; (ii) such information may be disclosed to the
extent required by accounting rules and regulations or the rules and regulations
of a securities exchange to which a disclosing party is subject; (iii) such
information may be confidentially disclosed by Buyers or Appleton to third
parties (including employees of the Business and their respective spouses and
financial advisors) to obtain debt or equity financing to fund the Purchase
Price; provided that prior to such disclosure Buyers promptly advise and consult
--------
with Sellers concerning the information it proposes to disclose; and (iv) such
information may be disclosed by Buyers to any U.S. or foreign governmental
agency in connection with this Agreement or the transactions contemplated
hereby, including, without limitation, disclosures made to the U.S. Securities
and
51
Exchange Commission, any state securities commission, the U.S. Department of
Labor and the Pension Benefit Guaranty Corporation; provided, further that the
-------- -------
foregoing shall not apply where such information becomes generally available to
the public from a source other than the other party or a representative of the
other party and the receiving party reasonably believes that it may permissibly
disclose such information. Sellers and Buyers acknowledge that the provisions of
this paragraph Error! Reference source not found. shall not apply to the
disclosure of information in order to obtain the consents or waivers from third
parties prior to consummation of the transactions hereunder.
5.16 Professional Advisors. The parties acknowledge that they may each,
---------------------
under certain circumstances, have an obligation to pay the fees, costs and
expenses of Houlihan Lokey Howard & Zukin Capital pursuant to the letter of
intent, dated February 17, 2001, by and between Buyer 1 and Seller Parent, and
certain other agreements ancillary thereto.
6. CONDITIONS.
----------
6.1 Condition to the Obligations of Buyers and Sellers. The obligations
--------------------------------------------------
of Buyers and Sellers to consummate the transactions contemplated by this
Agreement shall be subject to the satisfaction or waiver at or prior to the
Closing Date of the following condition:
At the Closing Date, there shall be no injunction, restraining order or
decree of any nature of any court or governmental agency or body of competent
jurisdiction that is in effect that restrains or prohibits the consummation of
the purchase by, or the transfer by Sellers to, Buyers of the Partnership
Interests and there shall be no claim, legal action, suit, arbitration or other
administrative action pending seeking so to do.
6.2 Conditions to the Obligations of Buyers. The obligations of Buyers
---------------------------------------
to consummate the transactions contemplated by this Agreement shall be subject
to the satisfaction or waiver at or prior to the Closing Date of the following
conditions:
52
(a) Buyers shall have obtained a minimum of $100 million of equity
financing to fund the payment of the Purchase Price.
(b) Prior to the Closing Date, there shall have been no change in law
or published Internal Revenue Service interpretation respecting S Corporation
status that, in the reasonable opinion of Buyers, could have a material adverse
effect on its anticipated post-Closing cash flows.
(c) The conditions to the obligations of the Lenders to provide the
Debt Financing shall have been satisfied or waived.
6.3 Condition to the Obligations of Sellers. The obligations of Sellers to
---------------------------------------
consummate the transactions contemplated by this Agreement shall be subject to
the satisfaction or waiver at or prior to the Closing Date of the following
condition:
The Lenders shall be willing to consummate the Debt Financing on terms no
less favorable, taken as a whole, to the Purchased Entities and the Sellers
than those set forth in Schedule 5.13.
-------------
7. CLOSING.
-------
7.1 Closing Date. Unless this Agreement shall have been terminated
------------
pursuant to Section 10 hereof, the closing of the transactions contemplated by
this Agreement (the "Closing") shall take place at the offices of McDermott,
-------
Will & Emery, 50 Rockefeller Plaza, New York, New York, at 10:00 A.M., New York
City time, on or before five (5) days after the satisfaction of the conditions
to the Closing set forth in Section 6 hereof (the "Closing Date"), or at such
------------
other place and time as the parties shall agree.
7.2 Buyers' Deliveries. At the Closing, Buyers shall deliver, or caused
------------------
to be delivered, to Sellers the following, in form and substance reasonably
acceptable to Sellers:
53
(a) a copy of the certificate of incorporation, operating agreement or
analogous organizational document of each Buyer, as amended, certified by the
corporate secretary or other authorized officer or agent of such Buyer;
(b) a copy of the resolutions duly adopted by the Board of Directors (or
other governing body) of each Buyer evidencing its authorization of the
execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby, certified by the corporate secretary, managing
member or other authorized officer or agent of such Buyer;
(c) the Cash Payment;
(d) payoff letters relating to the discharge of all of the Appleton Debt
and release of all related Liens;
(e) a certificate of an officer or other authorized agent of each Buyer
certifying (i) that the representations set forth in Section 4 are true and
correct on the Closing Date as if made on such date (ii) that each Buyer has
performed and complied in all material respects with all covenants, conditions
and obligations under this Agreement which are required to be performed or
complied with by each Buyer on or prior to the Closing Date, and (iii) the names
and signatures of the officers of such Buyer authorized to sign this Agreement
and the Ancillary Agreements;
(f) an executed copy of each Fox River Indemnification Agreement;
(g) opinions of Godfrey & Kahn, S.C. and/or White & Case, counsel to
Buyers, in form reasonably acceptable to Sellers;
(h) letters of discharge with respect to each Known Business Guarantee;
(i) an executed certificate of each Manager substantially in the form of
Exhibit C hereto;
- ---------
54
(j) an executed copy of each of the agreements listed on Schedule
--------
7.2(j) hereto; and
- ------
(k) such other documents and instruments as counsel for Buyers and
Sellers mutually agree to be reasonably necessary to consummate the transactions
described herein.
7.3 Sellers' Deliveries. At the Closing, Sellers shall deliver, or cause
-------------------
to be delivered, to Buyers the following, in form and substance reasonably
acceptable to Buyers:
(a) a copy of the certificate of incorporation, operating agreement,
partnership agreement or analogous organizational document of each Purchased
Entity, as amended, certified by the corporate secretary or other authorized
officer or agent of such Purchased Entity;
(b) a certificate of an officer or other authorized agent of Seller
Parent and each Seller, certifying (i) that the representations set forth in
Section 3 are true and correct on the Closing Date as if made on such date after
giving effect to any updates to the Schedules to this Agreement made by Sellers
prior to the Closing Date, (ii) that each of the Sellers and the Seller Parent
have performed and complied in all material respects with all covenants,
conditions and obligations under this Agreement which are required to be
performed or complied with by each of the Sellers and the Seller Parent on or
prior to the Closing Date, and (iii) the names and signatures of the officers of
Seller Parent and each Seller authorized to sign this Agreement and the
Ancillary Agreements;
(c) a copy of the resolutions duly adopted by the Board of Directors
or other governing body of each Seller and Seller Parent evidencing its
authorization of the execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby, certified by its corporate
secretary or other authorized officer or agent;
55
(d) an executed copy of each Fox River Indemnification Agreement, together
with all deliveries called for by Seller Parent thereunder.
(e) opinions of McDermott, Will & Emery, counsel to Sellers, in form
reasonably acceptable to Buyers;
(f) an executed copy of each of the agreements listed on Schedule 7.2(j)
---------------
hereto;
(g) evidence of payment of all amounts due under that certain letter of
Seller Parent, dated February 12, 2001, to Doug Buth;
(h) letters of resignation, dated as of the Closing Date, of all
individuals who are officers or employees of Sellers, Seller Parent or any of
their Affiliates who serve as officers or directors of any of the Purchased
Entities;
(i) an acknowledgement or letter signed by Sellers or their appropriate
Affiliate(s) terminating the Management Services Agreement with one or more of
the Purchased Entities as of January 1, 2001 together with reimbursement of any
fees paid by any of the Purchased Entities on account of 2001;
(j) evidence that each Seller and Seller Parent shall have designated a
United States resident entity to accept service on its behalf in connection with
any formal legal proceedings that may be instituted against such Seller and/or
Seller Parent; and that such designation shall be effective for a period of not
less than ten (10) years; and
(k) such other documents and instruments as counsel for Buyers and Sellers
mutually agree to be reasonably necessary to consummate the transactions
described herein.
8. INDEMNIFICATION.
---------------
8.1 Agreement to Indemnify.
----------------------
(a) (i) Subject to the limitations provided herein, Sellers and
Seller Parent shall, jointly and severally, indemnify and hold harmless Buyers
to the extent set forth in this Section Error! Reference source not found. in
respect of any Losses reasonably and proximately incurred by any Buyer or any of
its Affiliates (collectively, the "Buyer Indemnitees") (A) as a result of any
-----------------
inaccuracy or misrepresentation in or breach of or failure to perform any
representation, warranty, or post-closing covenant, agreement or obligation of
Sellers or Seller Parent in this Agreement or any agreement, document or
certificate delivered hereunder, (B) in connection with any Excluded Operations
Liability or (C) in connection with any Other Excluded Liability. In the case of
clauses (B) and (C) in the foregoing sentence: (1) the Sellers' and Seller
Parent's obligations to indemnify the Buyers are absolute notwithstanding any
disclosures set forth in the Schedules hereto, and (2) Sellers or Seller Parent
shall pay to Buyers any amounts paid by any Purchased Entity between the date
hereof and the Closing Date in final settlement of any item described therein.
(ii) Notwithstanding the foregoing, (A) the sole recourse of
the Buyer Indemnitees for any Losses resulting from, relating to or
arising in connection with any Fox River Liability shall be pursuant
to the Fox River Indemnification Agreements and (B) the sole recourse
of the Buyer Indemnitees for any Losses resulting from, relating to
or arising in connection with Taxes shall be pursuant to Section 5.9.
(iii) Notwithstanding anything in this Agreement to the
contrary, Sellers and Seller Parent shall be liable only for fifty
percent (50%) of the Environmental Losses until such time as all
Environmental Losses for which
57
indemnification is sought hereunder exceeds $5,000,000 in the
aggregate and Sellers and Seller Parent shall thereafter be liable
for 100% of all Environmental Losses above such $5,000,000 in the
aggregate of Losses.
(iv) Sellers and Seller Parent shall make payments of amounts
under this Section 8.1(a) in increments of $100,000 or greater
(except as set forth in Clause (B) of the following sentence).
Accordingly, payments of obligations under this Section 8.1(a) shall
be aggregated and then paid upon the earlier to occur of (A) such
time that the unpaid indemnification amounts exceed $100,000 in the
aggregate, or (B) six (6) months shall have elapsed since the most
recent indemnification payment to the Buyers under this Section
8.1(a)
(v) (A) Except as set forth in subsection (B) below, the
aggregate collective liability of Sellers and Seller Parent for
Losses under this Agreement (including under Sections 5.9 and 8.1
hereof) shall not exceed $100,000,000 (the "Maximum Amount").
(B) The Maximum Amount shall not apply to the obligations
of Sellers and Seller Parent under or in connection with (x)
Excluded Operations Liabilities, (y) Excluded Operations Taxes,
or (z) the Fox River Indemnification Agreements, as to all of
which there shall be no limit on the obligations of Seller and
Seller Parent. For the purposes hereof, "Excluded Operations
-------------------
Taxes" shall mean any Net Income Taxes arising by reason of (aa)
-----
the transfer of the AWSA Note as part of the Reorganization, and
(bb) the sale and transfer of Appleton's ownership
58
interests in Appleton Coated LLC and Appleton Leasing LLC to
Appleton Coated Papers Holdings Inc.
(b) Buyers shall indemnify and hold harmless Seller Parent, each
Seller and their respective Affiliates (collectively, the "Seller Indemnitees"
------------------
and, together with the Buyer Indemnitees, the "Indemnitees") to the extent set
-----------
forth in this Section 8, in respect of any and all Losses reasonably and
proximately incurred by any Seller Indemnitee as a result of (i) any inaccuracy
or misrepresentation in or breach of or failure to perform any representation,
warranty, covenant, agreement or obligation of any Buyer in this Agreement or
any agreement, document or certificate delivered hereunder. Buyers shall
indemnify and hold harmless each Seller Indemnitee in respect of all Losses
reasonably and proximately incurred by any Seller Indemnitee (i) as a result of
the conduct of the Business after the Closing; (ii) in respect of any
Stand-Alone Benefit Plan; (iii) in respect of any Business Guarantee or (iv)
resulting from any allegation or claim by any investor in Buyer 1 or its
shareholder or a lender to either Buyer, their shareholders or any Purchased
Entity relating to such investment or loan.
8.2 Survival of Representations and Warranties. The representations and
------------------------------------------
warranties contained in this Agreement shall survive as follows:
(a) Except as otherwise provided in Section 8.2(b), all
representations and warranties shall expire on July 30, 2003; and
(b) Notwithstanding Section 8.2(a), the representations and
warranties of Sellers shall survive the Closing Date until the expiration of any
applicable statute of limitations, including extensions thereof, with respect to
any inaccuracy or misrepresentation in or breach of any representation or
warranty made in Sections 3.1, 3.2, 3.3, 3.4, 3.5, 3.12, 3.13 and 3.16.
59
Any cause of action for breach of a representation or warranty contained
herein shall expire and terminate unless the party claiming that such breach
occurred delivers to the other party written notice and a reasonably detailed
explanation of the alleged breach on or before 5:00 P.M., London time, on the
date on which such representation or warranty expires pursuant to this Section
8.2.
8.3 Claims for Indemnification. If any Indemnitee shall believe that such
--------------------------
Indemnitee is entitled to indemnification pursuant to Section 8.1 in respect of
any Losses, such Indemnitee shall give the appropriate Indemnifying Party
written notice within thirty (30) Business Days of its becoming aware thereof;
provided, however, that the unintentional failure to give such notice on a
timely basis shall only bar a claim for indemnification to the extent that the
Indemnifying Party has been actually adversely affected by such failure. Any
such notice shall set forth in reasonable detail, and to the extent then known,
the basis for such claim for indemnification.
8.4 Defense of Claims.
-----------------
(a) The Indemnifying Party may undertake the defense of any claim,
assertion, event or Proceeding by or in respect of a third party (a "Third Party
-----------
Claim") if, within thirty (30) days after receiving notice of such Third Party
- -----
Claim, the Indemnifying Party gives written notice to the Indemnitee stating
that it intends to defend against such Third Party Claim at its own cost and
expense. The Indemnifying Party may also request that the Indemnitee manage the
defense of such Third Party Claim on its behalf. The Indemnitee may, in its
discretion, undertake the defense of any Third Party Claim seeking, in whole or
in part, injunctive or other non-monetary or equitable relief. In the event that
the Indemnifying Party undertakes the defense of the Third Party Claim, the
Indemnifying Party will keep the
60
Indemnitee advised as to all material developments in connection with such Third
Party Claim, including, but not limited to, promptly furnishing to the
Indemnitee copies of all material documents filed or served in connection
therewith. The Indemnitee shall, upon reasonable notice, provide the
Indemnifying Party with full cooperation and access to his, her or its records
and personnel relating to any such claim, assertion, event, proceeding or matter
during normal business hours and shall otherwise cooperate with the Indemnifying
Party in the defense, settlement, or resolution thereof, and the Indemnifying
Party shall reimburse the Indemnitee for all his, her or its reasonable
out-of-pocket expenses in connection therewith. In the case of a Third Party
Claim the defense of which is managed by the Indemnitee (either by request or
default), the Indemnitee shall use its best efforts to carry out such defense
and to reduce the Losses suffered in connection therewith, and the Indemnifying
Party shall reimburse the Indemnitee for all of his, her or its reasonable
out-of-pocket expenses in connection therewith (including reasonable attorneys'
fees). In the event the Indemnifying Party undertakes the defense, the
Indemnitee shall have the right to employ one separate counsel per jurisdiction
with respect to any Third Party Claim and to participate in the defense thereof,
but the fees and expenses of such counsel shall be at the expense of the
Indemnitee unless there are conflicts that make it reasonably necessary for
separate counsel to represent the Indemnitee and the Indemnifying Party;
provided that under no circumstances shall the Indemnifying Party be liable for
the fees and expenses of more than one counsel per jurisdiction in any Third
Party Claim for the Indemnitee together with its Subsidiaries and their
respective officers, directors, employees, agents, successors and assigns, taken
collectively and not separately. The assumption of any defense hereunder by an
Indemnifying Party shall not be deemed an admission of responsibility for the
underlying claim or an admission of responsibility to indemnity.
61
(b) The Indemnifying Party may, without the Indemnitee's consent but with
notice thereof to Indemnitee, settle or compromise any Third Party Claim or
consent to the entry of any judgment if such settlement, compromise or judgment
involves only the payment of money by the Indemnifying Party, contains no
admission of responsibility by the Indemnitee and provides for unconditional
release by the claimant or the plaintiff of the Indemnitee from all liability in
respect of such Third Party Claim.
(c) In the event that the Indemnifying Party, within thirty (30) days after
receiving written notice of any such Third Party Claim, fails to assume the
defense thereof, the Indemnitee shall have the right, subject to the provisions
of this Section 8, to undertake the defense of such Third Party Claim for the
account of the Indemnifying Party at the expense of the Indemnifying Party. The
Indemnitee shall not have the right to compromise or settle any such Third Party
Claim without the prior written consent of the Indemnifying Party. If the
Indemnitee defends any such claim or Proceeding, (i) the Indemnifying Parties
may participate in, but not control, the defense of such claim or Proceeding,
(ii) the Indemnitee shall provide the Indemnifying Parties with a copy of any
settlement proposal from the Person asserting such claim or instituting such
Proceeding immediately upon receipt thereof, (iii) if the Indemnitee receives
any such settlement proposal, the liability of the Indemnifying Parties with
respect to such claim or Proceeding shall equal the lesser of (x) the amount
offered in such settlement proposal, (y) the amount of actual Losses of the
Indemnitee with respect to such claim or Proceeding or (z) the maximum liability
of the Indemnifying Parties pursuant to Section 8.1(a) and (iv) the Indemnitee
shall take all reasonable steps necessary in the defense or settlement thereof
and shall at all times diligently and promptly pursue the resolution thereof.
62
(d) Notwithstanding anything contained in this Section 8 to the
contrary, (i) the defense of any Third Party Claim relating to Fox River
Liabilities shall be resolved solely in accordance with the Fox River
Indemnification Agreements and (ii) Section 5.9 shall govern the Tax
indemnification obligations of Sellers and Seller Parent and the procedures
which apply to the resolution of all proceedings with respect to Taxes.
8.5 Indemnification Calculations.
----------------------------
(a) The amount of any Losses for which indemnification is provided
under this Section 8 shall include the out-of-pocket expenses incurred by the
Indemnitee and shall be computed net of any insurance proceeds received by such
Indemnitee in connection with such Losses (but after giving effect to any costs
incurred in obtaining any such insurance proceeds) and net of any Tax Benefit
arising by reason of any such Loss. For purposes of this Section 8.5, a "Tax
Benefit" means the actual Tax benefit that the Indemnitee shall obtain if the
Loss is a deductible expense against income being taxed at the highest marginal
federal and state tax rates applicable to the income of such Indemnitee in the
year of the Loss. The Indemnitee shall be obligated to seek to obtain such Tax
Benefit in respect of all Losses. Each Indemnitee shall take all reasonable
efforts to mitigate its Losses for which indemnification is provided in this
Section 8; if such efforts are not taken, the amount of indemnifiable Losses
shall be reduced accordingly.
(b) The parties agree that any indemnification payments made pursuant
to this Agreement shall be treated for tax purposes, as between Buyers and
Sellers, as an adjustment to the Purchase Price, unless otherwise required by
applicable law, regulations or governmental agency interpretations thereof.
8.6 Right of Set-Off. In addition to any other remedies available to
----------------
Buyers, Buyers shall have the right in their discretion to require satisfaction
of any of Sellers' or Seller
63
Parent's indemnification obligations hereunder or under the Fox River
Indemnification Agreements by way of set-off against the Value Amount (as
described on Schedule 2.3) of the Deferred Payment.
------------
8.7 Security.
--------
(a) At any time prior to September 30, 2006, if the consolidated
"tangible net assets" of Seller Parent and its Subsidiaries and its share of
joint ventures and associates ("tangible net assets" being "net assets,"
adjusted to remove "intangible assets," "deferred tax assets" and "deferred tax
liabilities," in each case as calculated on the same basis and using the same
methodology employed in the preparation of Seller Parent's statutory accounts
or, if such accounts are no longer prepared, on the basis that would be used in
preparing such accounts in accordance with English law and UK GAAP) shall, as
determined at the end of any fiscal quarter, have (i) remained below (pound)500
million for more than two (2) consecutive fiscal quarters or (ii) fallen below
(pound)500 million at any time as a result of (A) a sale of assets outside of
the ordinary course of business, (B) a sale to a third party of stock or other
ownership interests of any direct or indirect operating subsidiary of Seller
Parent or (C) any other discrete transaction outside the ordinary course of
business, Seller Parent shall deliver $10,000,000 in cash into escrow, pursuant
to an Escrow Agreement substantially in the form of Exhibit B hereto, with a
---------
mutually agreed-upon commercial bank as escrow agent until September 30, 2006;
such escrow deposit shall be made immediately following the determination that
such deposit is required to made pursuant hereto, but in any event not later
than ten (10) days after delivery of a certification pursuant to Section 8.7(b)
that reflects Seller Parent's obligation to make such scrow deposit.
(b) For so long as Seller Parent's obligations under this Section 8.7
apply and no money has been deposited into escrow pursuant to subsection (a),
Seller Parent shall provide
64
Buyers with a quarterly certificate by the 30th day of the month following the
end of the preceding fiscal quarter, setting forth Seller Parent's consolidated
tangible net assets as of the last day of the previous fiscal quarter, in the
form of Schedule 8.7 hereto; provided that Seller Parent shall provide Buyers
------------ --------
with immediate notice of any event described in Section 8.7(a)(ii) above.
8.8 Exclusive Remedy. Except as otherwise provided herein, the
----------------
indemnification provisions in Section 8 of this Agreement shall provide the sole
and exclusive remedy of the parties hereto, their Affiliates, and any of their
officers, directors, employees, stockholders, agents and representatives with
respect to any and all Losses of any kind or nature whatever incurred because of
or resulting from or arising out of this Agreement, the transactions
contemplated hereby, the Business, and the Purchased Entities and any of their
assets and liabilities (other than Losses to the extent resulting from (a)
Liabilities or Losses resulting from, relating to or arising in connection with
Taxes (for which the sole recourse of Buyers, their Affiliates and any of their
officers, directors, employees, stockholders, agents and representatives shall
be pursuant to Section 5.9) and (b) Fox River Liabilities (for which the sole
recourse of Buyers, their Affiliates and any of their officers, directors,
employees stockholders, agents and representatives shall be pursuant to the Fox
River Indemnification Agreements)). In furtherance of the foregoing, each party
hereby waives, on its own behalf and on behalf of its Affiliates and of any of
their officers, directors, employees, stockholders, agents and representatives,
to the fullest extent permitted under applicable law, any and all rights, claims
and causes of action any of them may now or hereafter have against the other
party and its Affiliates and their officers, directors, employees, stockholders,
agents and representatives, arising under or based upon any federal, state,
local or foreign statute, law ordinance, rule or regulation (including without
65
limitation any such rights, claims and causes of action relating to
Environmental Law or arising under or based upon common law) or otherwise
(except pursuant to Section 8 of this Agreement).
9. COVENANT NOT TO COMPETE
9.1 Seller Parent Non-Compete.
-------------------------
(a) From and after the Closing Date, Seller Parent shall not, and shall
cause its Subsidiaries and Affiliates from time to time to not, directly or
indirectly, individually or collectively, engage in any Seller Competitive
Activity for three (3) years after the Closing Date (the "Covered Period");
--------------
provided that the foregoing shall not apply to Appleton Coated Papers Holdings,
- --------
Inc. and its Subsidiaries (including, without limitation, Appleton Coated LLC);
and provided, further, however, that, notwithstanding the foregoing, (i) neither
-------- ------- -------
Seller Parent nor any of its Subsidiaries nor any of its Affiliates shall be
deemed to be engaged in a Seller Competitive Activity solely by virtue of the
ownership of less than twenty percent (20%) of the outstanding voting securities
or debt securities of any Person of which it (and its Affiliates) do not have
voting or day-to-day operational control and the equity or debt securities of
which are traded on an United States or foreign stock exchange or quoted on the
National Association of Securities Dealers Automated Quotation System; and (ii)
Seller Parent, its Subsidiaries and Affiliates may acquire a security or other
interest of any kind, magnitude, or proportion, whether by subscription,
agreement, partnership or otherwise in a Person or business engaged in a Seller
Competitive Activity, including by way of an acquisition of assets of such
Person or business, if (x) in the calendar year immediately preceding the
acquisition, the revenues of such Person or business derived from the acquired
Seller Competitive Activities do not exceed fifteen percent (15%) of the total
revenues of such Person or business, (y) the aggregate revenues during any
calendar year during the Covered Period derived from Seller Competitive
Activities of all
66
Persons and businesses acquired in accordance with this Section 9.1 are not
reasonably expected to exceed, after giving pro forma effect to the acquisition
of such Person or business, $100,000,000 or, if reasonably expected to so exceed
$100,000,000, that portion of such Person or business engaged in a Seller
Competitive Activity is disposed of within six (6) months of its acquisition and
(z) Seller Parent or its Subsidiary or Affiliate acquiring such Person or
business agrees in writing with Buyers not to take any actions out of the
ordinary course that would have the effect of expanding the amount of Seller
Competitive Activities carried out by such Person or business for the balance of
the Covered Period (any Person or business described in this subsection (ii)
being a "Permitted Acquired Business").
---------------------------
(b) For purposes of this Section 9.1, "Seller Competitive Activity"
---------------------------
shall mean the manufacture or sale in the United States, Canada, Mexico, the
Caribbean or Central or South America (the "Covered Territory") of carbonless
-----------------
copying paper made by Seller Parent or Affiliates of Seller Parent (the "Covered
-------
Sales") in any of the periods during the Covered Period (i) in excess of the
- -----
maximum aggregate volumes applicable to such period set forth on Schedule 9.1-1
--------------
(the "Period Maximum Sales"); or (ii) to Persons in the Covered Territory other
--------------------
than those Persons set forth on Schedule 9.1-2 (and, for the avoidance of doubt,
--------------
a substantial increase in the volume of sales of carbonless paper by Seller
Parent, its Subsidiaries or Affiliates to Elof Hannsson as a result of the offer
by them of special incentives, promotions or the like to such customer shall be
deemed to be Seller Competitive Activity even if not resulting in a violation of
the sales limitations set forth in (i) above). It is further provided, however,
that "Seller Competitive Activity" shall not include: (x) the resales by any of
---------------------------
the Persons listed on Schedule 9.1-2 in their existing territory as set forth in
--------------
such schedule); or (y) the manufacture or sale of carbonless paper in the
Covered Territory by a Permitted Acquired Business (without regard to
67
the limitations set forth in this paragraph (b), but subject to the restrictions
on the activities of any such Permitted Acquired Business as set forth in (a)(z)
above); or (z) the supply to Appleton of coated front carbonless copying paper
by Seller Parent or its Affiliates. Further, for the avoidance of doubt and
notwithstanding anything contained herein to the contrary, Seller Parent and its
Affiliates shall not be deemed in violation of this Section 9.1 by reason of
Covered Sales in excess of the Period Maximum Sales unless (1) Appleton delivers
Seller Parent with a written notice within 90 days following the end of the
applicable period requesting Seller Parent to certify as to the volume of
Covered Sales during such period, in which case Seller Parent must provide such
certification within 30 days following delivery of such notice, and (2) in fact
the Covered Sales, as so certified by Seller Parent, exceed the Period Maximum
Sales; provided, however, Seller Parent or any Affiliate of Seller Parent may
-------- -------
cure any such violation with respect to any of the first two twelve month
periods by reducing the Period Maximum Sales during the subsequent twelve month
period by the extent of the excess Covered Sales during such period. Any dispute
respecting the amount of the Covered Sales shall be resolved pursuant to Article
11 below. For the purposes of determining the amount of the Covered Sales during
any period, a sale shall be deemed to have been made upon the legal importation
of the underlying product into the Covered Territory.
9.2 Non-Disclosure of Proprietary Confidential Information; Trade
-------------------------------------------------------------
Secrets.
-------
(a) For a period of three (3) years after the date hereof, (i)
Sellers and Seller Parent, and (ii) Buyers, each acknowledge and agree that at
no time shall they or any of their Affiliates (which, in the case of the Buyers
shall include the Purchased Entities) knowingly or by gross negligence disclose
any Proprietary Confidential Information (as hereinafter defined) with respect
to the other party or its Affiliates unless the disclosing party has received
the written
68
advice of independent counsel that disclosure of such terms is required by any
statute, regulation, rule, injunction, judgment, order, decree, ruling, charge
or other requirement of any governmental authority or securities exchange to
which such disclosing party is subject; provided that prior to such disclosure,
--------
the disclosing party promptly advises and consults with the non-disclosing party
or parties concerning the information it proposes to disclose; provided that
--------
such information may be confidentially disclosed by the parties hereto to their
respective Affiliates, directors, officers, employees, agents, accountants,
lawyers, financial advisors and other representatives which have a need to know
in connection with the transactions contemplated hereby; provided, the foregoing
--------
shall not apply where such information becomes generally available to the public
from a source other than the other party or a representative of the other party
and the receiving party reasonably believes that it may permissibly disclose
such information; and provided that financial information may be disclosed to
--------
the extent required by accounting rules or regulations or the rules or
regulations of a securities exchange to which a party is subject.
(b) For purposes of this Section 9.2, the term "Proprietary Confidential
------------------------
Information" shall mean all non-public and all proprietary information relating
- -----------
to the Business or the Sellers' Business, as the case may be, and their
respective customers and products and services including, without limitation,
the following (to the extent that it is and remains non-public and proprietary
information): (i) all production information and know-how and all other
technical information relating to the production of the products or services of
the Business or the Sellers' Business, as the case may be, to the extent that
such information is unique to the Business or Sellers' Business, as the case may
be; (ii) all information concerning products or services under development by or
being tested by the Business or the Sellers' Business, as the
69
case may be, to the extent that such information is unique to the Business or
Sellers' Business, as the case may be, but not yet offered for sale; (iii) all
information to the extent such information is unique to the Business or Sellers'
Business, as the case may be, concerning pricing policies of the Business or the
Sellers' Business, the prices charged by the Business or the Sellers' Business
to their respective customers, the volume of orders of such customers and other
information concerning the transactions of the Business or the Sellers' Business
with their respective customers or proposed customers; (iv) the customer lists
of the Business or the Sellers' Business, as the case may be; (v) financial
information concerning the Business or the Sellers' Business, as the case may
be; (vi) information concerning the marketing programs or strategies of the
Business or the Sellers' Business, as the case may be; and (vii) all other
confidential and proprietary information of the Business or the Sellers'
Business.
(c) Nothing in this Agreement shall be construed as (i) a waiver of any
party's rights to protection of their trade secrets and the trade secrets of the
Business or the Sellers' Business, as the case may be, under federal, state or
other law or to limit or supersede the common law of torts or statutory or other
protection of their or their Affiliates' trade secrets where such law provides
any party with greater protections or protections for a longer duration than
that provided in this Section 9.2; (ii) a restriction on any existing or future
granted right of a party or its Affiliates to use any Proprietary Confidential
Information; or (iii) an acknowledgement of the existence of a right of a party
to use Proprietary Confidential Information that it does not otherwise already
have.
9.3 Buyers Non-Compete. From and after the Closing Date, each Buyer shall
------------------
not, and shall cause each of the Purchased Entities and the Subsidiaries and
Affiliates of Buyers and/or the Subsidiaries and Affiliates of the Purchased
Entities from time to time to not, directly
70
or indirectly, individually or collectively, engage in any Buyer Competitive
Activity during the Covered Period; provided, however, that, notwithstanding the
-------- -------
foregoing, (a) neither Buyer and none of their respective Subsidiaries and
Affiliates shall be deemed to be engaged in a Buyer Competitive Activity solely
by virtue of the ownership of less than twenty percent (20%) of the outstanding
voting securities or debt securities of any Person of which it (and its
Affiliates) do not have voting or day-to-day operational control and the equity
or debt securities of which are traded on an United States or foreign stock
exchange or quoted on the National Association of Securities Dealers Automated
Quotation System; and (b) either Buyer or any of their respective Subsidiaries
or Affiliates may acquire a security or other interest of any kind, magnitude,
or proportion, whether by subscription, agreement, partnership or otherwise in a
Person or business engaged in a Buyer Competitive Activity if (i) in the fiscal
year immediately preceding the acquisition, the revenues of such Person or
business from the acquired Buyer Competitive Activities do not exceed fifteen
percent (15%) of the total revenues of such Person or business and (ii) the
aggregate revenues during any fiscal year during the Covered Period derived from
Buyer Competitive Activities of all Persons and businesses acquired in
accordance with this Section Error! Reference source not found. are not
reasonably expected to exceed after giving pro forma effect to the acquisition
of such Person or business, $100,000,000 or, if reasonably expected to exceed
$100,000,000, that portion of such Person or business engaged in a Buyer
Competitive Activity is disposed of within six (6) months of its acquisition and
(iii) the Person acquiring such Person or business agrees in writing with Seller
Parent not to take any actions out of the ordinary course that would have the
effect of expanding the amount of Buyer Competitive Activities carried out by
such Person or business for the balance of the Covered Period.
71
For purposes of this Section 9.3, "Buyer Competitive Activity" shall mean
--------------------------
the manufacture or sale of carbonless copying paper in Europe. Buyers, Purchased
Entities and their respective Affiliates and Subsidiaries shall not be deemed in
violation of this Section 9.3 in the event that any purchaser of carbonless
copying paper from any one of them in a transaction that does not violate the
provisions hereof resells any such product in Europe and a direct sale of such
product into Europe by Buyers, the Purchased Entities or any of their respective
Affiliates would have constituted a breach of this Section 9.3 unless and until
----------------
Seller Parent provides written notice of such resale to Buyers, in which case
Buyers shall be in violation hereof only as to such sales made in Europe by the
reseller identified in the written notice following thirty (30) days after the
later of (i) delivery of such written notice, or (ii) the resolution of any
disputes as to the applicability of this provision.
9.4 Severability. The invalidity or unenforceability of this Section 9 in
------------
any respect shall not affect the validity or enforceability of this Section 9 in
any other respect, or of any other provision of this Agreement. In the event
that any provision of this Section 9 shall be held invalid or unenforceable by a
court of competent jurisdiction by reason of the geographic or business scope or
the duration thereof or for any other reason, such invalidity or
unenforceability shall attach only to the particular aspect of such provision
found invalid or unenforceable as applied and shall not affect or render invalid
or unenforceable any other provision of this Section 9 or the enforcement of
such provision in other circumstances, and, to the fullest extent permitted by
law, this Section 9 shall be construed as if the geographic or business scope or
the duration of such provision or other basis on which such provision has been
challenged had been more narrowly drafted so as not to be invalid or
unenforceable.
72
9.5 Enforcement. The parties acknowledge and agree that each other party
-----------
hereto and its Affiliates are engaged in a highly competitive business and that
the protections set forth in this Section 9 are fair and reasonable and are of
vital concern to the parties. Buyers specifically acknowledge that, as the
senior members of the Purchased Entities' management possess competitively
significant confidential information regarding the strategic and business
planning and customer relationships of Sellers and their Affiliates, the
protections set forth in Section 9.1 are reasonably necessary to protect
Sellers' retained business operations from any unfair competitive use of such
confidential information. Further, each party acknowledges and agrees that
monetary damages for any violation of this Section 9 will not adequately
compensate the parties to be benefited by its covenants in this Section 9 with
respect to any such violation. Therefore, in the event of a breach by any party
of any of the terms and provisions contained in this Section 9, and
notwithstanding Section 11, an injured party shall be entitled to obtain damages
for any such breach (the amount of such damages being irrespective of the
consideration being allocated to the within provisions) and/or to enforce the
specific performance of this Section 9 by such breaching party and to enjoin
such breaching party from any further violations. In connection therewith, the
parties hereby waive, to the fullest extent permitted by law, any requirement
for the posting of a bond or other collateral security in connection with any
application for injunctive relief. The remedies available to the parties
pursuant to this Section 9.5 may be exercised cumulatively in conjunction with
all other rights and remedies provided by law.
9.6 Termination of Covenants.
------------------------
(a) In the event that (i) Buyers, in good faith, reasonably believe
that Seller Parent or any of its Subsidiaries or Affiliates other than the
Purchased Entities (the "Selling
-------
73
Parties") has defaulted in the performance of its obligations under Section 9.1,
- -------
and shall have provided Seller Parent with notice of such default and afforded
Seller Parent with ninety (90) days to cease, or cause to be ceased, the
activities constituting such default and such activities shall not have ceased
within such period, (ii) Seller Parent shall have challenged in writing the
validity of the whole or any part of Section 9.1 or (iii) Section 9.1 shall have
been found to be unenforceable, in whole or in part, by any court of competent
jurisdiction, then the Buying Parties (as defined below) shall, as of such date,
be automatically released from all future obligation to comply with the terms of
Section 9.3; provided, that if either Buyer or any of their Subsidiaries or
--------
Affiliates (including the Purchased Entities) (collectively, the "Buying
------
Parties") engages in Buyer Competitive Activities following a finding of partial
- -------
unenforceability of Section 9.1, the Selling Parties shall automatically be
released from all future obligation to comply with the terms of Section 9.1; and
provided, further, if the Selling Parties are finally determined by any court of
- -------- -------
competent jurisdiction not to have engaged in activities which, assuming the
provisions of Section 9.1 are fully enforceable, would have been in violation of
its duties thereunder, and the Buying Parties have engaged in Buyer Competitive
Activities during the Covered Period, Buyers shall indemnify and hold Sellers
harmless against all Losses incurred by Sellers and their Affiliates as a result
of such Buyer Competitive Activities.
(b) In the event that (i) Seller Parent, in good faith, reasonably
believes any Buying Party has defaulted in the performance of its obligations
under Section 9.3, and shall have provided Buyers with notice of such default
and afforded Buyers with ninety (90) days to cease, or cause to be ceased, the
activities constituting such default and such activities shall not have ceased
within such period, (ii) either Buyer shall have challenged in writing the
validity of the whole or any part of Section 9.3 or (iii) Section 9.3 shall have
been found to be
74
unenforceable in whole or in part by any court of competent jurisdiction, then
the Selling Parties shall, as of such date, be automatically released from all
future obligation to comply with the terms of Section 9.1; provided that if
--------
Selling Party engages in Seller Competitive Activities following a finding of
partial unenforceability of Section 9.3, the Buying Parties shall automatically
be released from all future obligation to comply with the terms of Section 9.3;
and provided, further, if the Buying Parties are finally determined by any court
-------- -------
of competent jurisdiction not to have engaged in activities which, assuming the
provisions of Section 9.3 are fully enforceable, would have been in violation of
their duties thereunder, and the Selling Parties have engaged in Seller
Competitive Activities during the Covered Period, Seller Parent shall indemnify
and hold Buyers harmless against all Losses incurred by Buyers and their
Affiliates as a result of such Seller Competitive Activities.
9.7 Continuation of Covenant.
------------------------
(a) If Seller Parent and its Affiliates sell substantially all
their business relating to the manufacture of carbonless copying paper in Europe
during the Covered Period to a single purchaser in a single transaction and the
purchaser is not already engaged in the manufacture of carbonless copy paper,
such Selling Party shall, as a condition to such sale, require the purchaser of
such business to agree to be bound by the terms of Section 9 of this Agreement
to the same extent applicable to the Seller Parent.
(b) If Buyers, the Purchased Entities and their Affiliates and
Subsidiaries sell substantially all of their business relating to the
manufacture of carbonless copying paper in the Covered Territory during the
Covered Period to a single purchaser in a single transaction and the purchaser
is not already engaged in the manufacture of carbonless copy paper, the Buyers
shall,
75
as a condition to such sale, require the purchaser of such business to agree to
be bound to the terms of Section 9 to the same extent applicable to the Buyers.
10. TERMINATION.
-----------
10.1 Termination Events. Without prejudice to other remedies which may
------------------
be available to the parties by law or under this Agreement, this Agreement may
terminated and the transactions contemplated herein may be abandoned:
(a) by mutual written consent of the parties hereto;
(b) by Buyers or Sellers, if any of the conditions set forth in
Section 6.1 shall have become incapable of fulfillment, and shall not have been
waived in writing by the party seeking to terminate this Agreement under this
Section 10.1(b);
(c) by Buyers if any of the conditions set forth in Section 6.2
shall have become incapable of fulfillment, and shall not have been waived in
writing by Buyers;
(d) by Buyers or Sellers, by written notice to the other if the
Closing shall not have been consummated on or before November 21, 2001, unless
extended by written agreement of the parties hereto; provided, however, that the
-------- -------
right to terminate this Agreement under this Section 10.1(d) shall not be
available to any party that (i) has not used, in accordance with Section 5.2,
reasonable efforts to consummate and make effective the transactions
contemplated by this Agreement or (ii) has breached this Agreement;
(e) by Buyers, if all of the conditions set forth in Section 6
shall have been satisfied, Buyers shall be ready, willing and able to complete
the Closing, and Sellers shall not have made the deliveries required by Section
7.3 on or before ten (10) days following the date designated for Closing
pursuant to Section 7.1; and
(f) by Sellers, if all of the conditions set forth in Section 6
shall have been satisfied, Sellers shall be ready, willing and able to complete
the Closing, and Buyers shall not
76
have made the deliveries required by Section 7.2 on or before ten (10) days
following the date designated for the Closing pursuant to Section 7.1.
10.2 Effect of Termination. In the event of any termination of the
---------------------
Agreement as provided in Section 10.1 above, then all further obligations of the
parties under this Agreement shall terminate without further liability on the
part of any party to the others, other than with respect to the obligations of
Buyers and Sellers under Section 13.4 of this Agreement.
11. DISPUTE RESOLUTION.
------------------
11.1 Negotiation Between Executives. Except as otherwise provided
------------------------------
elsewhere in this Agreement, the Buyers and the Sellers shall attempt in good
faith to resolve any dispute or difference between or among the parties arising
out of or relating to this Agreement promptly by negotiation between executives
of the relevant parties who have authority to settle the controversy. Either
Buyers or Sellers may give the other written notice of any dispute not resolved
in the normal course of business. Within fifteen (15) days after delivery of the
notice, the receiving party shall submit to the other a written response. The
notice of dispute and the response shall include (a) a statement of each party's
position and a summary of arguments supporting that position, and (b) the name
and title of the executive who will represent that party and of any other person
who will accompany the executive. Within thirty (30) days after delivery of the
disputing party's notice, the executives of both parties shall meet at a
mutually acceptable time and place, and thereafter as often as they reasonably
deem necessary, to attempt to resolve the dispute. All reasonable requests for
information made by one party to the other will be honored. All such information
and all negotiations pursuant to this Section 11.1 are confidential and shall be
treated as compromise and settlement negotiations for purposes of applicable
rules of evidence.
77
11.2 Mediation. If the dispute has not been resolved by negotiation within
---------
forty-five (45) days of the disputing party's notice, or if the parties failed
to meet within twenty (20) days, the parties endeavor to settle the dispute by
confidential and non-binding mediation under the then current CPR Mediation
Procedure in effect on the date of this Agreement. Unless otherwise agreed, the
parties will select a mediator from the CPR Panels of Distinguished Neutrals.
11.3 Arbitration. Any dispute or difference between or among the parties
-----------
arising out of or relating to this Agreement, which has not been resolved by a
non-binding procedure pursuant to Sections 11.1 or 11.2 hereof within ninety
(90) days of the initiation of such procedure, shall be settled by arbitration
in accordance with the CPR Rules for Non-Administered Arbitration in effect on
the date of this Agreement, by three arbitrators, two of which shall be
designated by the respective parties with the third arbitrator to be appointed
by the first two arbitrators in accordance with CPR Rule 5.2 or by such other
procedures as the parties may elect; provided, however, that if any of the
-------- -------
relevant parties will not participate in a non-binding procedure, the other
parties may initiate arbitration pursuant to this Section 11.3 before the
expiration of the above period. The arbitration shall be governed by the Federal
Arbitration Act, 9 U.S.C. (S)(S) 1-16, and judgment upon the award rendered by
the arbitrator may be entered by any court having jurisdiction thereof. The
place of arbitration shall be New York, New York. The language of the
arbitration shall be English. The arbitration shall be governed by the law of
the State of New York. The arbitrator is not empowered to award damages in
excess of compensatory damages and each party expressly waives and foregoes any
right to punitive, exemplary or similar damages unless a statute requires that
compensatory damages be increased in a specified manner. Following the final
arbitration hearings, the arbitrators shall promptly
78
deliver a written decision with respect to the dispute to each of the parties,
who shall promptly act in accordance therewith. Each party agrees that any
decision of the arbitrators shall be final, conclusive and binding and that they
will not contest any action by any other party thereto in accordance with a
decision of the arbitrators. It is specifically understood and agreed that any
party may enforce any award rendered pursuant to the arbitration provisions of
this Section 11.3 by bringing suit in any court of competent jurisdiction.
11.4 Fees, Costs and Expenses. All reasonable fees, costs and expenses
------------------------
(including attorneys' fees and expenses) incurred by the party that prevails in
any such arbitration commenced pursuant to Section 11.3 or any judicial action
or proceeding seeking to enforce the agreement to arbitrate disputes as set
forth in Section 11.3 or seeking to enforce any order or award of any
arbitration commenced pursuant to this Section 11.3 may be assessed (in whole or
in part) against the party or parties that do not prevail in such arbitration in
such manner as the arbitrators or the court in such judicial action, as the case
may be, may determine to be appropriate under the circumstances. All costs and
expenses attributable to the arbitrators shall be allocated among the parties to
the arbitration in such manner as the arbitrators shall determine to be
appropriate under the circumstances.
11.5 Depositions. In connection with any arbitration commenced pursuant to
-----------
Section 11.3, each party shall be entitled to depose five (5) witnesses in
advance of the final arbitration hearings.
12. SELLER PARENT GUARANTEE.
-----------------------
Seller Parent hereby unconditionally and absolutely guarantees to Buyers
the prompt and full payment and performance of all covenants, agreements and
other obligations of Sellers hereunder, including but not limited to all of
Sellers' indemnification obligations pursuant to Section 5.9 and Sellers'
obligations pursuant to Section 8. The foregoing guarantee shall be
79
direct, absolute, irrevocable and unconditional and shall not be impaired
irrespective of any modification, release, supplement, extension or other change
in the terms of all or any of the obligations of Sellers hereunder or for any
other reason whatsoever. Seller Parent hereby waives any requirement of
promptness, diligence or notice with respect to the foregoing guaranty and any
requirement that Buyers exhaust any right or take any action against Sellers in
respect of any of their obligations hereunder.
13. MISCELLANEOUS AGREEMENTS OF THE PARTIES
---------------------------------------
13.1 Notices. All communications provided for hereunder shall be in
-------
writing and shall be deemed to be given when delivered in person or by private
courier with receipt, when telefaxed and received, and,
If to either Buyer:
Appleton Papers Inc.
825 E. Wisconsin Avenue
P.O. Box 359
Appleton, WI 54912-0359
Facsimile: (920) 991- 7256
Attention: Paul Karch,
Vice President, Law and
Public Affairs and
General Counsel
with copies to:
Godfrey & Kahn, S.C.
780 N. Water Street
Milwaukee, WI 53202
Facsimile: (414) 273-5198
Attention: Christopher B. Noyes
80
State Street Bank and Trust Company
Trustee of the ESOP Component of the
Appleton Papers Retirement Saving Plan
Two International Place
Boston, MA 02110
Facsimile: (617)
Attention: Kelly G. Driscoll
Jones Day Reavis & Pogue
77 West Wacker
Suite 3500
Chicago, IL 60601-1692
Facsimile: (312) 782-8585
Attention: Ronald S. Rizzo
If to Seller Parent or either Seller:
Arjo Wiggins Appleton p.l.c.
St. Clement House
Alencon Link
Basingstoke
Hampshire RG21
ENGLAND
Facsimile: 011-44-1256-796075
Attention: Company Secretary
and
Arjo Wiggins
Washington Plaza
29 Rue de Berri
75408 Paris
Cedex 08
FRANCE
Facsimile: 011-33-1-5669-3961
Attention: Director of Legal Services
with a copy to:
McDermott, Will & Emery
50 Rockefeller Plaza
New York, NY 10020
Attention: C. David Goldman
Facsimile No.: 212-547-5444
or to such other address as any such party shall designate by written notice to
the other parties hereto.
81
13.2 Transfer Taxes. Buyers shall be responsible for the payment of all
--------------
sales and transfer taxes, if any, which may be payable with respect to the
consummation of the transactions contemplated by this Agreement.
13.3 Further Assurances. Upon request from time to time, Sellers and Seller
------------------
Parent shall execute or cause their respective Subsidiaries to execute and
deliver all documents, take all rightful oaths, and do all other acts that may
be reasonably necessary or desirable, in the reasonable opinion of counsel for
Buyers, to perfect or record the title of Buyers, or any successor of Buyers, to
the assets transferred or to be transferred under this Agreement, or to aid in
the prosecution, defense, or other litigation of any rights arising from said
transfer (provided that Buyers shall reimburse Sellers for all out-of-pocket
--------
costs and expenses resulting from any such request).
13.4 Expenses. Subject to Section 13.2, Sellers and Buyers shall each pay
their respective expenses (such as legal, investment banker, accounting fees and
any fees referenced in Section 5.16) incurred in connection with the
origination, negotiation, execution and performance of this Agreement. Sellers
agree that Appleton shall advance all reasonable fees and expenses incurred by
Buyers in connection with the transactions contemplated hereby, including,
without limitation, fees and expenses of counsel and other professional advisors
to Buyers ("Transaction Expenses") up to the amount for each such Transaction
--------------------
Expense set forth on the budget attached hereto as Schedule 13.4 (the "Budget");
------------- ------
provided that Appleton shall not advance any fees or amounts payable contingent
upon the Closing and Appleton shall have no obligation to advance to Buyers any
additional amounts in excess of those amounts set forth in the Budget.
82
13.5 Assignment. This Agreement shall inure to the benefit of and be
----------
binding on the parties hereto and their respective successors and permitted
assigns. This Agreement shall not be assigned by any party hereto without the
express prior written consent of the other parties, and any attempted
assignment, without such consents, shall be null and void.
13.6 Amendment; Waiver. This Agreement may be amended, supplemented or
-----------------
otherwise modified only by a written instrument executed by the parties hereto.
No waiver by either party of any of the provisions hereof shall be effective
unless explicitly set forth in writing and executed by the party so waiving.
Except as provided in the preceding sentence, no action taken pursuant to this
Agreement, including without limitation, any investigation by or on behalf of
any party, shall be deemed to constitute a waiver by the party taking such
action of compliance with any representations, warranties, covenants, or
agreements contained herein, and in any documents delivered or to be delivered
pursuant to this Agreement and in connection with the Closing hereunder. The
waiver by any party hereto of a breach of any provision of this Agreement shall
not operate or be construed as a waiver of any subsequent breach.
13.7 Joint and Several Liability. Buyers and Sellers hereby acknowledge
---------------------------
and agree that all obligations of Sellers herein shall be deemed joint and
several obligations of each Seller and that all obligations of Buyers herein
shall be deemed joint and several obligations of each Buyer; and any references
to Buyers or Sellers hereunder shall, where applicable, refer to the appropriate
Buyer or Seller.
13.8 Schedules. All schedules hereto are hereby incorporated by reference
---------
and made a part of this Agreement. Any fact or item which is disclosed on any
Schedule to this Agreement or in the Financial Statements shall be deemed to be
an exception to such representation or representations or to be disclosed on
such other Schedule or Schedules, as the
83
case may be, notwithstanding the omission of a reference or cross-reference
thereto. Any fact or item disclosed on any Schedule hereto shall not by reason
only of such inclusion be deemed to be material and shall not be employed as a
point of reference in determining any standard of materiality under this
Agreement.
13.9 Third Parties. This Agreement does not create any rights, claims or
-------------
benefits inuring to any Person that is not a party hereto nor create or
establish any third party beneficiary hereto.
13.10 Governing Law. This Agreement shall be governed by, and construed in
-------------
accordance with, the laws of the State of New York.
13.11 Consent to Jurisdiction. EXCEPT AS IS OTHERWISE PROVIDED IN SECTION
-----------------------
11, EACH OF THE PARTIES HERETO IRREVOCABLY AND UNCONDITIONALLY CONSENTS TO
SUBMIT TO THE JURISDICTION OF THE COURTS OF THE STATE OF NEW YORK OR THE COURTS
OF THE UNITED STATES OF AMERICA LOCATED IN THE STATE OF NEW YORK FOR ANY
ACTIONS, SUITS OR PROCEEDINGS ARISING OUT OF OR RELATING TO THIS AGREEMENT AND
THE TRANSACTIONS CONTEMPLATED HEREBY. EACH PARTY IRREVOCABLY AND UNCONDITIONALLY
WAIVES ANY OBJECTION TO THE LAYING OF VENUE OF ANY ACTION, SUIT OR PROCEEDING
ARISING OUT OF THIS AGREEMENT, OR THE TRANSACTIONS CONTEMPLATED HEREBY, IN THE
COURTS OF THE STATE OF NEW YORK OR THE COURTS OF THE UNITED STATES OF AMERICA
LOCATED IN THE STATE OF NEW YORK AND HEREBY FURTHER IRREVOCABLY AND
UNCONDITIONALLY WAIVE AND AGREE NOT TO PLEAD OR CLAIM IN ANY SUCH COURT THAT ANY
SUCH ACTION, SUIT OR
84
PROCEEDING BROUGHT IN ANY SUCH COURT HAS BEEN BROUGHT IN AN INCONVENIENT FORUM.
13.12 Entire Agreement. This Agreement and the Ancillary Agreements and
----------------
the Exhibits and the Schedules hereto and thereto set forth the entire
understanding of the parties hereto as to matters not expressly excepted or
excluded herefrom or therefrom.
13.13 Section Headings; Table of Contents. The section headings contained
-----------------------------------
in this Agreement and the Table of Contents to this Agreement are for reference
purposes only and shall not affect the meaning or interpretation of this
Agreement.
13.14 Severability. If any provision of this Agreement shall be declared
------------
by any court of competent jurisdiction to be illegal, void or unenforceable, all
other provisions of this Agreement shall not be affected and shall remain in
full force and effect.
13.15 Counterparts. This Agreement may be executed in any number of
------------
counterparts, each of which shall be deemed to be an original and all of which
together shall be deemed to be one and the same instrument.
85
IN WITNESS WHEREOF, the parties have caused this Purchase Agreement to be
duly executed as of the date first above written.
ARJO WIGGINS APPLETON p.l.c.
By: /s/ James Morley
Name: James Morley
Title: Director
By: /s/ Luca PaVeri-Fontana
Name: Luca PaVeri-Fontana
Title: Director
ARJO WIGGINS US HOLDINGS LTD.
By: /s/ Luca PaVeri-Fontana
Name: Luca PaVeri-Fontana
Title: Authorized Signatory
ARJO WIGGINS NORTH AMERICA INVESTMENTS LTD.
By: /s/ James Morley
Name: James Morley
Title: Authorized Signatory
PAPERWEIGHT DEVELOPMENT CORP.
By: /s/ Doug Buth
Name: Douglas P. Buth
Title: President
NEW APPLETON LLC
By: /s/ Doug Buth
Name: Douglas P. Buth
Title: President of Paperweight
Development Corp., sole member
of New Appleton LLC
[Attachment to Exhibit 10.4]
Schedule 2.3
------------
Terms of Deferred Payment
-------------------------
See attached.
[Attachment to Exhibit 10.4]
Schedule 2.3
------------
Deferred Payment Terms and Conditions
-------------------------------------
ARTICLE 1
DEFINITIONS
SECTION 1.01. Definitions.
-----------
"Administrative Agent" means Toronto Dominion (Texas), Inc., as
administrative agent.
"Attributable Debt" in respect of a Sale and Leaseback Transaction
means, at the time of determination, the present value of the obligation of the
lessee for net rental payments during the remaining term of the lease included
in such sale and leaseback transaction including any period for which such lease
has been extended or may, at the option of the lessor, be extended. Such present
value shall be calculated using a discount rate equal to the rate of interest
implicit in such transaction, determined in accordance with GAAP.
"Beneficial Owner" has the meaning assigned to such term in Rule 13d-3
and Rule 13d-5 under the Exchange Act, except that in calculating the beneficial
ownership of any particular "person" (as that term is used in Section 13(d)(3)
of the Exchange Act), such "person" shall be deemed to have beneficial ownership
of all securities that such "person" has the right to acquire by conversion or
exercise of other securities, whether such right is currently exercisable or is
exercisable only upon the occurrence of a subsequent condition. The terms
"Beneficially Owns" and "Beneficially Owned" have a corresponding meaning.
"Board of Directors" means:
(1) with respect to a corporation, the board of directors of the
corporation;
(2) with respect to a partnership, the Board of Directors of the
general partner of the partnership; and
(3) with respect to any other Person, the board or committee of such
Person serving a similar function.
"Buyer 1 Intercompany Acquisition Loan" means the loan by Appleton to
Buyer 1 of $478,750,000 utilizing the proceeds of the Senior Subordinated Note,
a portion of the term loans under the Credit Agreement and other cash available
on the consolidated balance sheet of AWDGP immediately prior to the Closing
Date.
"Buyer 2 Intercompany Acquisition Loan" means the loan by Appleton to
Buyer 2 of $67,250,000 utilizing the proceeds of the Senior Subordinated Note, a
portion of the term loans under the Credit Agreement and other cash available on
the consolidated balance sheet of AWDGP immediately prior to the Closing Date.
"Capital Lease Obligation" means, at the time any determination is to
be made, the amount of the liability in respect of a capital lease that would at
that time be required to be capitalized on a balance sheet in accordance with
GAAP.
"Capital Stock" means:
(1) in the case of a corporation, corporate stock;
(2) in the case of an association or business entity, any and all
shares, interests, participations, rights or other equivalents (however
designated) of corporate stock;
(3) in the case of a partnership or limited liability company,
partnership or membership interests (whether general or limited); and
(4) any other interest or participation that confers on a Person the
right to receive a share of the profits and losses of, or distributions of
assets of, the issuing Person.
"Change of Control" means the occurrence of any of the following:
(1) the direct or indirect sale, transfer, conveyance or other
disposition (other than by way of merger or consolidation), in one or a series
of related transactions, of all or substantially all of the properties or assets
of Buyer 1 and its Subsidiaries taken as a whole to any 44 person" (as that term
is used in Section 13(d)(3) of the Exchange Act);
(2) the adoption of a plan relating to the liquidation or dissolution
of Buyer 1 or Appleton;
(3) the consummation of any transaction (including, without limitation,
any merger or consolidation) the result of which is that any "person" (as
defined above) becomes the Beneficial Owner, directly or indirectly, of more
than 50% of the Voting Stock of Buyer 1, measured by voting power rather than
number of shares;
(4) the first day on which a majority of the members of the Board of
Directors of Appleton and Buyer 1 are not Continuing Directors;
(5) the first day on which Buyer 1 ceases to be the Beneficial Owner of
100% of the outstanding Capital Stock of Appleton; or
(6) the failure of the ESOP to own 100% of Buyer 1.
"Consolidated Net Income" means, with respect to any specified Person
for any period, the aggregate of the Net Income of such Person and its
Subsidiaries for such period, on a consolidated basis, determined in accordance
with GAAP; provided that:
(1) the Net Income of any Subsidiary (other than Appleton) shall be
excluded to the extent that the declaration or payment of dividends or similar
distributions by that Subsidiary of that Net Income is not at the date of
determination permitted without any prior governmental approval (that has not
been obtained) or, directly or indirectly, by operation of the terms of its
2
charter or any agreement, instrument, judgment, decree, order, statute, rule or
governmental regulation applicable to that Subsidiary or its stockholders;
(2) the Net Income of any Person acquired in a pooling of interests
transaction for any period prior to the date of such acquisition shall be
excluded;
(3) the Net Income of any Person which is not a Subsidiary or is accounted
for by the, equity method of accounting shall be excluded except to the extent
of the amount of dividends or distributions actually paid in cash by such Person
to the specified Person; and
(4) the cumulative effect of a change in accounting principles shall be
excluded.
"Continuing Directors" means, as of any date of determination, any member
of the Board of Directors of Appleton or Buyer 1, as the case may be, who:
(1) was a member of such Board of Directors of such company on the Closing
Date; or
(2) was nominated for election or elected to such Board of Directors in
accordance with the Security Holders Agreements or, if inapplicable, with the
approval of a majority of the Continuing Directors who were members of such
Board at the time of such nomination or election.
"Credit Agreement" means that certain Credit Agreement, dated as of
November 8, 2001 by and among Buyer 1, Appleton, the several banks and other
financial institutions or entities from time to time parties thereto, Bear
Steams & Co. Inc., as sole lead arranger and sole bookrunner, Bear Steams
Corporate Lending Inc., as syndication agent, LaSalle Bank National Association
and U.S. Bank National Association d/b/a Firstar Bank N.A., each as
documentation agent and the Administrative Agent, providing for a senior secured
credit facility for up to $340.0 million consisting of a $75.0 million four-year
revolving credit facility, a $115.0 million four-year term loan A and a $150.0
million five-year term loan B including any related notes, guarantees,
collateral documents, instruments and agreements executed in connection
therewith and, in each case, together with any amendment thereto that, to the
extent it provides for additional borrowings, complies with the terms of Section
5.04.
"Default" means any event which is, or after notice or passage of time or
both would be, an Event of Default.
"Disqualified Stock" means any Capital Stock that, by its terms (or by the
terms of any security into which it is convertible, or for which it is
exchangeable, in each case at the option of the holder of the Capital Stock), or
upon the happening of any event, matures or is mandatorily redeemable, pursuant
to a sinking fund obligation or otherwise, or redeemable at the option of the
holder of the Capital Stock, in whole or in part, on or prior to the date that
is ninety-one (91) days after the Due Date. Notwithstanding the preceding
sentence, any Capital Stock that would constitute Disqualified Stock solely
because the holders of the Capital Stock have the right to require the Company
to repurchase such Capital Stock upon the occurrence of a change of control or
an asset sale shall not constitute Disqualified Stock if the terms of such
Capital Stock provide that the Company may not repurchase or redeem any such
Capital Stock pursuant to
3
such provisions unless such repurchase or redemption complies with Section 5.06
and any Capital Stock that would constitute Disqualified Stock solely because
the holders of that Capital Stock have the right to require Buyer 1, or Buyer 1
has the obligation to repurchase, such Capital Stock pursuant to the terms of
the ESOP shall not constitute Disqualified Stock.
"Domestic Subsidiary" means any Subsidiary of Buyer 1 that was formed under
the laws of the United States or any state of the United States or the District
of Columbia or that guarantees or otherwise provides direct credit support for
any Indebtedness of Buyer 1 or any of its Subsidiaries.
"Due Date" means May 8, 2010.
"Equity Interests" means Capital Stock and all warrants, options or other
rights to acquire Capital Stock (but excluding any debt security that is
convertible into, or exchangeable for, Capital Stock).
"ESOP Documentation" means (a) the Appleton Papers Retirement Savings and
Employee Stock Ownership Plan, restated effective January 1, 2001, (b) the
Appleton Papers Inc. Employee Stock Ownership Trust, adopted July 19, 2001, (c)
all amendments thereto adopted in accordance with Section 5.17 and (d) all
schedules, exhibits and annexes thereto and all agreements affecting the terms
thereof or entered into in connection therewith.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Hedging Obligations" means, with respect to any specified Person, the
obligations of such Person under:
(1) interest rate swap agreements, interest rate cap agreements and
interest rate collar agreements;
(2) other agreements or arrangements designed to protect such Person
against fluctuations in interest rates; and
(3) agreements or arrangements designed to protect such Person against
currency fluctuations or fluctuations in the cost of raw materials, in each
case, in amounts reasonably related to such Person's business and operations and
not for speculative purposes.
"Indebtedness" means, with respect to any specified Person and without
duplication, any indebtedness of such Person:
(1) in respect of borrowed money;
(2) evidenced by bonds, notes, debentures or similar instruments or letters
of credit (or reimbursement agreements in respect thereof);
(3) in respect of banker's acceptances;
(4) representing Capital Lease Obligations;
4
(5) representing the balance deferred and unpaid of the purchase price of
any Property; or
(6) representing any Hedging Obligations,
if and to the extent any of the preceding items (other than letters of credit
and Hedging Obligations) would appear as a liability upon a balance sheet of the
specified Person prepared in accordance with GAAP. In addition, the term
"Indebtedness" includes all Indebtedness of others secured by a Lien on any
asset of the specified Person (whether or not such Indebtedness is assumed by
the specified Person) and, to the extent not otherwise included, the guaranty by
the specified Person of any Indebtedness of any other Person.
"Investment" in any Person means any direct or indirect advance, loan or
other extension of credit (including by way of guaranty or similar arrangement)
or capital contribution to (by means of any transfer of cash or other property
to others or any payment for property or services for the account or use of
others), or any purchase or acquisition of Capital Stock, Indebtedness or other
similar instruments issued by such Person. For the purposes of the definition of
"Significant Subsidiary", "Investment" shall further include the portion
(proportionate to the Equity Interest held in such Subsidiary) of the fair
market value of the net assets of any Subsidiary on the Closing Date.
"Net Income" means, with respect to any specified Person, the net income
(loss) of such Person, determined in accordance with GAAP and before any
reduction in respect of preferred stock dividends, excluding, however:
(1) any gain (but not loss), together with any related provision for taxes
on such gain (but not loss), realized in connection with: (a) any sale of
assets; or (b) the disposition of any securities by such Person or any of its
Subsidiaries or the extinguishment of any indebtedness (including any
Indebtedness) of such Person or any of its Subsidiaries; and
(2) any extraordinary gain (but not loss), together with any related
provision for taxes on such extraordinary gain (but not loss).
"Note Purchase Agreement" means that certain Note Purchase Agreement, dated
as of the date hereof, by and between Appleton and Seller Parent.
"Permitted Business" means (a) any current businesses of the Purchased
Entities, (b) any extension of the current businesses of the Purchased Entities
and (c) any businesses which takes advantage of Appleton's strategic strengths
including, but not limited to, its basic core technologies (for example,
encapsulation, coating chemistry, coating application, papermaking and the
like).
"Permitted Indebtedness" shall have the meaning set forth in Section 5.04.
"Property" means, with respect to any Person, any interest of such Person
in any kind of property or asset, whether real, personal or mixed, tangible or
intangible.
5
"Purchase Indebtedness" means the Indebtedness (a) committed or available
under the Credit Agreement on the Closing Date and (b) represented by the Senior
Subordinated Note on the Closing Date.
"Purchase Refinancing Indebtedness" means any Indebtedness Incurred by
Buyer 1 or its Subsidiaries the proceeds of which are used to refinance, in
whole or in part, the Purchase Indebtedness.
"Registration Rights Agreement" means that certain Registration Rights
Agreement, dated as of the date hereof, by and between Appleton and Seller
Parent.
"Sale and Leaseback Transaction" means any arrangement with any Person
providing for the leasing by Buyer 1 or any of its Subsidiaries of any Property
now owned or hereafter acquired which has been or is to be sold or transferred
by Buyer 1 or any such Subsidiary to such Person with the intention of taking
back a lease of such Property.
"SEC" means the Securities and Exchange Commission.
"Securities Act" means the Securities Act of 1933, as amended.
"Security Holders Agreements" means (i) the Security Holders Agreement by
and between Buyer 1 and Appleton Papers Inc. Employee Stock Ownership Trust
dated as of November 8, 2001 and the (ii) Security Holders Agreement by and
between Buyer 1 and Appleton dated as of November 8, 2001.
"Senior Subordinated Note" means the $250,000,000 senior subordinated note
issued by Appleton on the Closing Date, together with the Note Purchase
Agreement and the Registration Rights Agreement.
"Senior Subordinated Note Refinancing Indebtedness" means any Indebtedness
Incurred by Buyer 1 or its Subsidiaries the proceeds of which are used to
refinance, in whole or in part, the Senior Subordinated Note.
"Significant Subsidiary" means (i) Appleton and (ii) each other direct or
indirect Subsidiary of Buyer 1 in which the total aggregate Investments of Buyer
1, Appleton and any of Buyer 1's other direct or indirect Subsidiaries exceeds $
10,000,000.
"Value Amount" means, as at any date, the positive difference between (a)
the present value on such date of $320,882,564 if paid on the Due Date,
determined by application of a discount rate of ten percent (10%) per annum
(calculated on the basis of a 360-day year for the actual days elapsed),
compounded semi-annually minus (b) an amount equal to the sum of (i) the
aggregate prepayments of the Deferred Payment received prior to such date
(including for this purpose any Change of Control Payments) and (ii) the
interest which would accumulate on such amounts from the date of each such
prepayment to the date of determination at a rate of interest of ten percent
(10%) per annum (calculated on the basis of a 360-day year for the actual days
elapsed), compounded semi-annually.
6
"Voting Stock" of any Person as of any date means the Capital Stock of such
Person that is at the time entitled to vote in the election of the Board of
Directors of such Person.
"Wholly Owned Subsidiary" of any specified Person means a Subsidiary of
such Person all of the outstanding Capital Stock or other ownership interests of
which (other than directors' qualifying shares) will at the time be owned by
such Person or by one or more Wholly Owned Subsidiaries of such Person and one
or more Wholly Owned Subsidiaries of such Person.
SECTION 1.02. Other Defined Terms. All capitalized terms used but not
-------------------
defined in this Schedule 2.3 shall have the meanings given such terms in the
------------
Agreement.
SECTION 1.03. Rules of Construction. Unless the context otherwise requires:
---------------------
(a) a term has the meaning assigned to it;
(b) an accounting term not otherwise defined has the meaning assigned to it
in accordance with GAAP;
(c) "or" is not exclusive;
(d) "including" means including without limitation;
(e) words in the singular include the plural and words in the plural
include the singular; and
(f) Section references are to Sections of this Schedule 2.3 unless the
context otherwise requires.
ARTICLE 2
DEFERRED PAYMENT
SECTION 2.01. Payment of Deferred Payment. Buyer 1 shall make all payments
---------------------------
in respect of the Deferred Payment when due in the manner provided herein.
SECTION 2.02. Optional Prepayment. Buyer 1, at its option, may elect to
-------------------
prepay the Deferred Payment in full or in part at any time. If Buyer 1 elects to
prepay the Deferred Payment, it shall provide Seller 1 with not less than five
(5) days' prior written notice of the date of prepayment (the "Prepayment Date")
and the dollar amount to be prepaid.
SECTION 2.03. Change of Control. If a Change of Control occurs, Seller 1
-----------------
may require Buyer 1 to offer to make all or any part of the then-current Value
Amount of the Deferred Payment (a "Change of Control Payment") pursuant to a
Change of Control Offer. In the Change of Control Offer, Buyer 1 shall offer a
Change of Control Payment in cash on the Change of Control Payment Date. Within
twenty (20) days following any Change of Control, Buyer 1 shall mail a notice (a
"Change of Control Offer") to Seller 1 describing the transaction or
transactions that constitute the Change of Control and offering to make the
Change of Control Payment on the date (the "Change of Control Payment Date")
specified in the notice, which date
7
shall be no earlier than thirty (30) days and no later than sixty (60) days from
the date such notice is mailed and described in such notice. To the extent that
the provisions of any securities laws or regulations conflict with the Change of
Control provisions hereof, Buyer 1 shall comply with the applicable securities
laws and regulations and shall not be deemed to have breached its obligations
under the Change of Control provisions hereof by virtue of such conflict.
(a) On the Change of Control Payment Date, Buyer 1 shall,, to the extent
lawful, pay to Seller 1 the Change of Control Payment.
(b) Buyer 1 shall not be required to make a Change of Control Offer upon a
Change of Control if a third party makes the Change of Control Offer in the
manner, at the times and otherwise in compliance with the requirements set forth
herein applicable to a Change of Control Offer made by Buyer 1 and makes (at the
Value Amount therefor) the Deferred Payment or the portion thereof properly
offered and not withdrawn under the Change of Control Offer.
SECTION 2.04. Mandatory Prepayment. Seller 1 may require Buyer 1, by
--------------------
providing written notice thereof at least thirty (30) days prior to the later of
(a) if the Senior Subordinated Note is repaid in full on or before November 8,
2002 (the "Repayment"), the date seven (7) years and six (6) months after the
date of the Repayment and i(b) November 8, 2009 (the later of such dates being
the "Mandatory Prepayment Date"), to offer to make all or any part of the
then-current Value Amount of the Deferred Payment (a "Mandatory Prepayment"). On
the Mandatory Prepayment Date, Buyer 1 shall, to the extent lawful, pay to
Seller 1 the Mandatory Prepayment.
SECTION 2.05. Discharge of Deferred Payment. The Deferred Payment shall be
-----------------------------
deemed to have been paid in full upon any payment which results in the Value
Amount of the Deferred Payment immediately following such payment to be $0.
ARTICLE 3
EXCHANGE RIGHTS
Seller 1 shall have the right, at any time and from time to time, to
exchange all or any part of the Deferred Payment for one or more new contractual
undertakings of Buyer 1 ("Exchange Obligations") and/or one or more notes of
Buyer 1 ("Exchange Notes") so long as, in any such case, the Exchange
Obligations and/or Exchange Notes (i) do not shorten the Due Date, (ii) do not
increase, in the aggregate, (A) the then-current Value Amount or (B) the amount
payable on the Due Date, (iii) do not provide for a mean interest rate (or
implied interest rate) of any remaining Deferred Payment, all Exchange Notes and
all Exchange Obligations exceeding ten percent (10%) per annum, (iv) do not give
rise to a default under the Purchase Indebtedness or any Permitted Indebtedness,
(v) do not require interest, principal or other payments in cash prior to the
Due Date, (vi) are not secured by the grant of any collateral or security
interest, (vii) are not guaranteed by additional guarantors or assumed by
additional obligors, (viii) do not include any additional covenants, events of
default or representations or warranties, (ix) do not include any additional
mandatory prepayment or redemption provisions, (x) do not include or require the
payment of additional fees in connection therewith, (xi) do not result in any
other increased costs to Buyer 1 (other than incidental costs relating to the
performance of its
8
obligations hereunder), (xii) are issued in compliance with all applicable
securities laws, and (xiii) do not result in any adverse tax consequences to
Buyer 1.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES
SECTION 4.01. Representations and Warranties of' Buyer 1. Buyer 1
------------------------------------------
hereby represents and warrants to Seller 1 that, as of the date hereof and as of
the Closing Date:
(a) Assuming the accuracy of the representations and warranties of
Seller 1 set forth in Section 4.02, no registration under the Securities Act of
the right to the Deferred Payment is required for the granting of the Deferred
Payment as contemplated hereby.
(b) None of the execution, delivery and performance of the Agreement,
the granting of the right to the Deferred Payment and the consummation of the
transactions contemplated thereby, will violate Regulations T, U or X
promulgated by the Board of Governors of the Federal Reserve System or analogous
foreign laws and regulations.
(c) Buyer 1 does not intend to, nor believes that it will, incur debts
beyond its ability to pay such debts as they mature. The present fair saleable
value of the consolidated assets of Buyer 1 exceeds the amount that will be
required to be paid on or in respect of its existing consolidated debts and
other liabilities (including contingent liabilities) as they become absolute and
matured. The consolidated assets of Buyer 1 do not constitute unreasonably small
capital to carry out its business as conducted or as proposed to be conducted.
Upon the incurrence of the obligation to make the Deferred Payment, the present
fair saleable value of the consolidated assets of Buyer 1 will exceed the amount
that will be required to be paid on or in respect of its existing consolidated
debts and other liabilities (including contingent liabilities) as they become
absolute and matured. Upon the incurrence of the obligation to make the Deferred
Payment, the consolidated assets of Buyer 1 will not constitute unreasonably
small capital to carry out its business as now conducted, including the capital
needs of Buyer 1, taking into account the projected capital requirements and
capital availability.
(d) There exist no conditions that constitute a default (or an event
which with notice or the lapse of time, or both, would constitute a default)
under the Credit Agreement, the Senior Subordinated Note or any agreements or
documents executed in connection therewith.
SECTION 4.02. Representations and Warranties of Seller 1. Seller 1
------------------------------------------
hereby represents and warrants to Buyer 1 that, as of the date hereof and as of
the Closing Date:
(a) Seller 1 is aware that Buyer 1's obligation to make the Deferred
Payment is not registered under the Securities Act, or under any state or
foreign securities laws.
(b) Seller 1 is an "accredited investor" (as such term is defined in
Rule 501 promulgated under the Securities Act).
(c) Seller 1 is not an underwriter, as such term is defined under the
Securities Act, and Seller 1 is holding its rights in respect of the Deferred
Payment solely for investment, with
9
no present intention to distribute such rights to any Person, and Seller 1 will
not sell or otherwise dispose of its right to the Deferred Payment except in
compliance with the registration requirements or exemption provisions under the
Securities Act and the rules and regulations promulgated thereunder, or any
other applicable securities laws.
ARTICLE 5
COVENANTS
SECTION 5.01. Corporate Existence. Buyer 1 shall do or cause to be
-------------------
done all things necessary to preserve and keep in full force and effect its
corporate existence, rights (charter and statutory) and franchises; provided,
--------
however, that Buyer 1 shall not be required to preserve any such right or
franchise if the Board of Directors of Buyer 1 shall determine that the
preservation thereof is no longer desirable in the conduct of the business of
Buyer 1 and that the loss thereof is not disadvantageous in any material respect
to Seller 1.
SECTION 5.02. Reports.
-------
(a) Buyer 1 shall deliver to Seller 1, within fifteen (15) days after
Appleton is required to file the same with the SEC, copies of the annual reports
and of the information, documents and other reports (or copies of such portions
of any of the foregoing as the SEC may from time to time by rules and
regulations prescribe) which Appleton may be required to file with the SEC
pursuant to Section 13 or Section 15(d) of the Exchange Act. Further, Buyer 1
shall deliver to Seller 1 any additional information provided to the holders of
the Senior Subordinated Note or any Senior Subordinated Note Refinancing
Indebtedness coincident with the provision of any such information to such
holders.
(b) Delivery of such reports, information and documents to Seller 1 is
for informational purposes only and Seller 1's receipt of such shall not
constitute constructive notice of any information contained therein or
determinable from information contained therein, including Buyer 1's compliance
with any of its covenants hereunder.
SECTION 5.03. Maintenance of Property. Buyer 1 shall cause all
-----------------------
Property used or useful in the conduct of its business or the business of any
Subsidiary to be maintained and kept in good condition, repair and working
order, ordinary wear and tear excepted; provided, however, that nothing in this
--------
Section 5.03 shall prevent Buyer 1 from discontinuing the operation or
maintenance of any of such Property if such discontinuance is, in the judgment
of Buyer 1, desirable in the conduct of its business or the business of any
Subsidiary and not disadvantageous in any material respect to Seller 1.
SECTION 5.04. Limitation on Incurrence of Indebtedness. Buyer 1 shall
----------------------------------------
not, nor shall it permit any Subsidiary to, directly or indirectly, create,
incur, issue, assume, guarantee or otherwise become directly or indirectly
liable (collectively, "Incur"), contingently or otherwise, with respect to any
Indebtedness, and Buyer 1 shall not, nor shall it permit any Subsidiary to,
issue any Disqualified Stock; provided that, notwithstanding the foregoing, the
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following Persons may Incur the following Indebtedness (collectively, "Permitted
Indebtedness"):
(a) Buyer 1 may Incur the following Indebtedness:
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(i) guarantees of the Purchase Indebtedness or any Purchase
Refinancing Indebtedness permitted pursuant to be Incurred pursuant to
this Section 5.04;
(ii) the Buyer 1 Intercompany Acquisition Loan;
(iii) other Indebtedness not to exceed $5,000 at any time
outstanding;
(iv) loans payable to Seller Parent pursuant to the terms of
the Fox River Indemnification Agreements; and
(v) any guarantee of the Indebtedness permitted by clauses
(c)(i) and (c)(ii) below.
(b) Buyer 2 may Incur the following Indebtedness;
(i) Buyer 2 Intercompany Acquisition Loan;
(ii) any guarantee of the Indebtedness permitted by clauses
(c)(i) and (c)(ii) below; and
(iii) loans payable by to Seller Parent pursuant to the terms
of the Fox River Indemnification Agreements.
(c) Appleton and its Subsidiaries may incur the following
Indebtedness:
(i) the Purchase Indebtedness;
(ii) any Purchase Refinancing Indebtedness not in excess of
the then outstanding principal amount of the Purchase Indebtedness
refinanced;
(iii) any guarantees of the Indebtedness permitted by the
foregoing clauses (a)(iv), (b)(iii), (c)(i) and (c)(ii);
(iv) loans payable by Buyer 1 and its Subsidiaries to
Seller Parent pursuant to the terms of the Fox River Indemnification
Agreements;
(v) an Incurrence of Indebtedness following which (A) the
aggregate resulting Indebtedness and Attributable Debt (excluding any
so-called working capital facilities) of Buyer 1 and its Subsidiaries
is $635,000,000 or less and (B) the Indebtedness resulting from such
Incurrence which is not used to discharge existing Indebtedness, when
taken together with all other Indebtedness or Attributable Debt
incurred pursuant to this Section 5.04(c)(v) or Section 5.04(c)(vi)
which remains outstanding on such date, does not exceed $ 100,000,000;
and
(vi) an Incurrence of Indebtedness if reasonably necessary to
avoid a default under the terms of the Purchase Indebtedness or any
Purchase Refinancing Indebtedness and the proceeds of such Incurrence
are immediately and directly applied to avoid such default.
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SECTION 5.05. Limitation on Sale and Leaseback Transactions. Buyer 1
---------------------------------------------
shall not, nor shall it permit any Subsidiary to, enter into any Sale and
Leaseback Transaction; provided that Buyer 1 or any Subsidiary may enter into a
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sale and leaseback transaction if:
(1) Buyer 1 or such Subsidiary could have incurred Indebtedness in an
amount equal to the Attributable Debt relating to such sale and leaseback
transaction pursuant to Section 5.04; and
(2) the gross cash proceeds of such Sale and Leaseback Transaction are
at least equal to the fair market value, as determined in good faith by the
Board of Directors of Buyer 1, of the property that is the subject of that sale
and leaseback transaction.
SECTION 5.06. Limitation on Restricted Payments. Buyer 1 shall not,
---------------------------------
directly or indirectly:
(a) declare or pay any dividend or make any other payment or
distribution on account of its Capital Stock (including, without limitation, any
payment in connection with any merger or consolidation involving Buyer 1) or to
the direct or indirect holders of Buyer 1's Capital Stock in their capacity as
such (other than dividends or distributions payable in Capital Stock (other than
Disqualified Stock)); or
(b) purchase, redeem or otherwise acquire or retire for value
(including, without limitation, in connection with any merger or consolidation
involving Buyer 1) any Capital Stock of Buyer 1,
(any such payments and other actions set forth in clauses (a) and (b) above
being collectively referred to as "Restricted Payments"); provide , however,
-------
that so long as no Default or Event of Default has occurred and is continuing or
would be caused thereby, the preceding provisions shall not prohibit Buyer 1
from (i) issuing Capital Stock (other than Disqualified Stock) to the employee
stock ownership component of the ESOP as an employer contribution to the ESOP,
(ii) satisfying its obligations to repurchase its common stock pursuant to the
ESOP Documentation from accounts allocated to participants in the ESOP upon the
death, disability or termination of employment of such participants or upon the
exercise by any such participant of his or her diversification rights under the
ESOP Documentation and (iii) making loans to the ESOP to permit the ESOP to make
loans or to fund hardship distributions to participants in the ESOP in
accordance with the ESOP Documentation; provided that such Restricted Payment,
--------
together with the aggregate amount of all other Restricted Payments made by
Buyer 1 after the Closing Date pursuant to clauses (ii) and (iii) above is less
than the sum, without duplication, of:
(A) 30% of the Consolidated Net Income of Buyer 1 for the period (taken
as one accounting period) from the beginning of the most recent full fiscal
quarter commencing prior to the Closing Date to the end of Buyer 1's most
recently ended fiscal quarter for which internal financial statements are
available at the time of such Restricted Payment (or, if such Consolidated Net
Income for such period is a deficit, less 100% of such deficit), plus
(B) 100% of the aggregate net cash proceeds received by Buyer 1 since
the Closing Date as a contribution to its common equity capital or from the
issue or sale of Equity Interests of Buyer 1 (other than Disqualified Stock) or
from the issue or sale of convertible or
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exchangeable debt securities of Buyer 1 that have been converted into
or exchanged for such Equity Interests (other than Equity Interests (or
Disqualified Stock or debt securities) sold to a Subsidiary of Buyer 1).
SECTION 5.07. Limitation on the Sale or Issuance of Capital Stock of
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Subsidiaries. Buyer 1 shall not permit any of its Subsidiaries to issue any
- ------------
Capital Stock (other than, if necessary, shares of its Capital Stock
constituting directors' qualifying shares) to any Person other than to Buyer 1
or a Wholly Owned Subsidiary of Buyer 1.
SECTION 5.08. Business Activities.
-------------------
(a) Buyer 1 shall not conduct, transact or otherwise engage in, or
commit to conduct, transact or otherwise engage in, any business or operations
other than those incidental to its direct or indirect ownership of the Capital
Stock of Appleton or those related to the ESOP and its participants.
(b) Buyer 1 shall not permit any Subsidiary to engage in any business
other than Permitted Businesses, except to such extent as would not be material
to Buyer 1 and its Subsidiaries taken as a whole.
SECTION 5.09. Limitation of Restrictions on Distributions from
------------------------------------------------
Subsidiaries. Buyer 1 shall not, and shall not permit any Subsidiary to, create
- ------------
or otherwise cause or permit to exist or become effective any consensual
encumbrance or restriction on the ability of any Subsidiary to (a) pay dividends
or make any other distributions on its Capital Stock to Buyer 1 or a Subsidiary
or pay any Indebtedness owed to Buyer 1 or a Subsidiary, (b) make any loans or
advances to Buyer 1 or a Subsidiary or (c) transfer any of its Property or
assets to Buyer 1 or a Subsidiary except any encumbrance or restriction pursuant
to the Purchase Indebtedness or any Purchase Refinancing Indebtedness.
SECTION 5.10. Limitation on Affiliate Transactions.
------------------------------------
(a) Buyer 1 shall not, and shall not permit any of its Subsidiaries to,
make any payment to, or sell, lease, transfer or otherwise dispose of any of its
properties or assets to, or purchase any property or assets from, or enter into
or make or amend any transaction, contract, agreement, understanding, loan,
advance or guarantee with, or for the benefit of, any Affiliate (each, an
"Affiliate Transaction"), unless:
(1) the Affiliate Transaction is on terms that are no less favorable to
Buyer 1 or the relevant Subsidiary than those that would have been obtained in a
comparable transaction by Buyer 1 or such Subsidiary with an unrelated Person;
and
(2) Buyer 1 delivers to Seller 1:
(A) with respect to any Affiliate Transaction or series of
related Affiliate Transactions involving aggregate consideration in
excess of $1.0 million, a resolution of the Board of Directors set
forth in an officers' certificate certifying that such Affiliate
Transaction complies with this covenant and that such Affiliate
Transaction has been approved by a majority of the disinterested
members of the Board of Directors; and
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(B) with respect to any Affiliate Transaction or series of related
Affiliate Transactions involving aggregate consideration in excess of $5.0
million, an opinion as to the fairness to the Holders of such Affiliate
Transaction from a financial point of view issued by an accounting,
appraisal or investment banking firm of national standing.
(b) The following items will not be deemed to be Affiliate Transactions
and, therefore, will not be subject to the provisions of the prior subparagraph
(a):
(1) any employment, termination protection, deferred compensation,
incentive, non-competition, benefit, consulting, indemnification or similar
agreement or plan entered into by Buyer 1 or any of its Subsidiaries in the
ordinary course of business with officers, directors or employees of Buyer 1 or
such Subsidiary;
(2) transactions between or among Buyer 1 and/or one or more of its
Wholly-Owned Subsidiaries;
(3) transactions with a Person that is an Affiliate of Buyer 1 or any
Subsidiary solely because Buyer 1 owns Capital Stock in, or controls such
Person;
(4) payment of reasonable compensation (including equity-based
compensation) and expense reimbursements to members of the Board of Directors
who are not otherwise Affiliates of Buyer 1 or any Subsidiary;
(5) sales of Equity Interests (other than Disqualified Stock) to Affiliates
of the Company;
(6) Restricted Payments permitted by Section 5.06;
(7) the repurchase by Buyer 1, or the issuance by Buyer 1, of shares of its
Capital Stock, from or to the ESOP, as the case may be, pursuant to the terms of
the ESOP, not otherwise prohibited hereby;
(8) agreements, with Seller Parent and/or its Affiliates, in existence at
closing, as amended, modified or supplemented from time to time; and
(9) amendments, modifications or supplements to the ESOP made from time to
time as are required by law or that do not adversely affect the legal rights of
Seller 1 hereunder.
SECTION 5.11. Ownership of Appleton. Buyer 1 shall at all times be the
---------------------
direct or indirect beneficial owner of 100% of the outstanding Capital Stock of
Appleton.
SECTION 5.12. Maintenance of Non-Investment Company Status. Buyer 1 shall
--------------------------------------------
not at any time be or become an "investment company" registered or required to
become so registered under the Investment Company Act of 1940 or any successor
law, rule or regulation.
SECTION 5.13. Maintenance of "S Corporation" Status. Buyer 1 shall not and
-------------------------------------
shall not permit any of its Subsidiaries to take any action that would
terminate, or may lead to the termination of, Buyer 1's qualification as an "S
Corporation" or the qualification of any
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Domestic Subsidiary (that is treated as a corporation for United States federal
income tax purposes) (other than any such Subsidiary that is an "Ineligible
Corporation" under Section 1361(b)(2) of the Code) as a "qualified subchapter S
subsidiary," in each case, under Subchapter S of the Code.
SECTION 5.14. Certificate as to Default. Buyer 1 shall deliver to Seller 1
-------------------------
within one hundred twenty (120) days after the end of each fiscal year of Buyer
1 (which on the date hereof is December 31) ending after the date hereof, a
certificate from the principal executive officer, principal financial officer or
principal accounting officer of Buyer 1, stating whether or not, to the best
knowledge of such officer, Buyer 1 has complied with all conditions and
covenants hereunder, under the Purchase Indebtedness and the Permitted
Indebtedness, and, if Buyer 1 shall be in Default, specifying all such Defaults
and the nature thereof of which such officer may have knowledge. For the
purposes of this Section 5.14, compliance shall be determined without regard to
any period of grace or requirement of notice hereunder.
SECTION 5.15. Notice of Default. Buyer 1 shall deliver written notice to
-----------------
Seller 1 ten (10) days after any officer of Buyer 1 has knowledge of the
occurrence of any event which with the giving of notice or the lapse of time or
both would become an Event of Default under Section 6.01.
SECTION 5.16. Compliance with Obligations. Buyer 1 shall comply, and shall
---------------------------
cause each of its Subsidiaries to comply, with the foregoing covenants, except
to the extent Seller 1 otherwise consents in writing.
SECTION 5.17. Limitation on Amendment of Certain Agreements. Without the
---------------------------------------------
consent of Seller 1, Buyer 1 shall not, and shall cause Appleton not to, amend,
modify or alter (a) either of the Security Holder Agreements or (b) any of the
ESOP Documentation in any way except (i) as may be required by applicable law,
(ii) to change a notice or address, (iii) to cure ambiguities, omissions,
defects or inaccuracies in a manner that is not adverse to Seller 1 or (iv) to
make any change that would provide any additional rights or benefits to Seller 1
or that does not adversely affect the legal rights of Seller 1.
ARTICLE 6
DEFAULTS AND REMEDIES
SECTION 6.01. Events of Default. Except where otherwise indicated by the
-----------------
context or where the term is otherwise defined for a specific purpose, the term
"Event of Default," wherever used herein with respect to the Deferred Payment,
shall mean any one of the following events (whatever the reason for such event
and whether it shall be voluntary or involuntary or be effected by operation of
law, pursuant to any judgment, decree or order of any court or any order, rule
or regulation of any administrative or governmental body):
(a) Buyer 1 defaults in any payment of the Deferred Payment when it becomes
due and payable (including any payment due pursuant to a Change of Control
Offer);
(b) default in the performance, or breach, of the obligations of Buyer 1
under Section 5.15;
15
(c) default in the performance, or breach, of any other covenant of Buyer 1
herein, and continuance of such default or breach for a period of forty-five
(45) days after notice to Buyer 1 from Seller 1; or
(d) any representation or warranty made by Buyer 1 herein or in the
Agreement shall prove to have been inaccurate in any material respect on or as
of the date made and such inaccuracy has a direct financial consequence of Fifty
Thousand Dollars ($50,000) or more;
(e) failure by Buyer 1 or any Subsidiary to pay final judgments aggregating
in excess of $10,000,000 which judgements are not covered by insurance, paid,
discharged or stayed for a period of ninety (90) days; provided, however, no
such failure shall constitute an Event of Default unless the Indebtedness under
the Credit Agreement shall have been accelerated by reason of an event described
in Section 9(h) thereof; or
(f) the entry of a decree or order for relief in respect of Buyer 1 or any
Significant Subsidiary by a court having jurisdiction in the premises in an
involuntary case under the Bankruptcy Code, or any other Federal or state
bankruptcy, insolvency or other similar law, or appointing a receiver,
liquidator, assignee, custodian, trustee, sequestrator (or other similar
official) of Buyer 1 or any Significant Subsidiary or of any substantial part of
the Property of Buyer 1 or any Significant Subsidiary, or ordering the winding
up or liquidation of the affairs of Buyer 1 or any Significant Subsidiary, and
the continuance of any such decree or order unstayed and in effect for a period
of sixty (60) consecutive days; or
(g) the commencement by Buyer 1 or any Significant Subsidiary of a
voluntary case under the Bankruptcy Code, or any other applicable Federal or
state bankruptcy, insolvency or other similar law, or the consent by it to the
entry of an order for relief in an involuntary case under any such law or to the
appointment of a receiver, liquidator, assignee, custodian, trustee,
sequestrator (or other similar official) of Buyer 1 or any Significant
Subsidiary or of any substantial part of the Property of Buyer 1 or any
Significant Subsidiary, or the making by Buyer 1 or any Significant Subsidiary
of an assignment for the benefit of creditors, or the admission by Buyer 1 or
any Significant Subsidiary in writing of its inability to pay its debts
generally as they become due, or the taking of corporate action by Buyer 1 or
any Significant Subsidiary in furtherance of any such action.
SECTION 6.02. Acceleration. If an Event of Default with respect to the
------------
Deferred Payment (other than an Event of Default specified in Section 6.01(f) or
6.01(g) with respect to Buyer 1) occurs and is continuing, then and in every
such case, Seller 1 may declare then-current Value Amount of the Deferred
Payment to be immediately due and payable, by a notice in writing to Buyer 1.
Upon such a declaration, the Value Amount of the Deferred Payment shall be due
and payable immediately.
If an Event of Default specified in Section 6.01(f) or 6.01(g) occurs with
respect to Buyer 1, the Deferred Payment shall ipso facto become and be
immediately due and payable without any declaration or other act on the part of
Seller 1.
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SECTION 6.03. Other Remedies. If an Event of Default occurs and is
--------------
continuing, Seller 1 may pursue any available remedy to collect the payment of
the Value Amount of the Deferred Payment or to enforce the performance of any
provision hereof.
A delay or omission by Seller 1 in exercising any right or remedy accruing
upon an Event of Default shall not impair the right or remedy or constitute a
waiver of or acquiescence in the Event of Default. No remedy is exclusive of any
other remedy. All available remedies are cumulative.
ARTICLE 7
BOARD OF DIRECTORS
(a) At any time following the occurrence and during the continuance of a
default under any Purchase Indebtedness or Purchase Refinancing Indebtedness as
a result of a nonpayment of principal, interest or other amounts due thereunder
when due which continues for a period of thirty (30) days beyond any applicable
grace period (a "Covered Default"), Buyer 1 agrees that it shall cause (i) if
Seller 1 or its Affiliates are the owners of 50% or more of the Deferred Payment
outstanding on such date, one (1) Person designated by Seller 1 to be elected as
a member of the Board of Directors of Appleton or (ii) at all other times, two
(2) Persons designated by Seller 1 to be elected as members of the Board of
Directors of Appleton.
(b) At all times thereafter, Seller 1 shall have the right to require the
removal, with or without cause, of any such director.
(c) In the event that Seller 1 shall require the removal of any director or
directors which it has designated, then Buyer 1 shall cause Appleton to promptly
effect such removal.
(d) In the event a vacancy is created on the Board of Directors of Appleton
by reason of the death, removal or resignation of any director designated by
Seller 1, Buyer 1 shall promptly cause a replacement director designated by
Seller 1 to be elected to fill such vacancy.
(e) Buyer 1 shall cause Appleton to compensate Seller 1's representatives
as it does its most highly compensated Board of Directors member (other than
members who are also employees of Appleton) and indemnify Seller 1 and its Board
of Directors designees to the fullest extent permitted by the Wisconsin business
corporation law.
(f) Any director designated by Seller 1 hereunder shall be subject to
removal by Buyer 1 or the remaining directors, in each case without cause, upon
(i) a cure of the related Covered Default reasonably acceptable to Seller 1 or
(ii) the written waiver of the related Covered Default by Seller 1.
ARTICLE 8
TRANSFERABILITY
Notwithstanding any provision of the Agreement to the contrary, the right
to receive the Deferred Payment, together with any Exchange Obligation or
Exchange Note, may be sold,
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pledged or otherwise transferred, in whole or in part, to (a) any Affiliate of
Seller 1, (b) any "accredited investors" or (c) with the prior written consent
of Buyer 1 (not to be unreasonably withheld), to any other Person not in direct
competition with the Business. In connection with any such transfer, Buyer 1
shall be provided with such certifications and opinions of counsel reasonably
requested by Buyer 1 or its counsel in connection therewith, in form reasonably
acceptable to Buyer 1, to the effect that such transfer is in compliance with
the Securities Act and applicable state securities laws.
In the event that Seller 1 transfers any of its right to receive the
Deferred Payment or any Exchange Obligation or Exchange Note, thereafter: (i)
any notices to be given to such transferees shall be deemed given if delivered
to Seller 1; (ii) any consents or waivers requested by Buyer 1 with respect to
the Deferred Payment or such Exchange Obligations or Exchange Notes may be made,
granted or denied by Seller 1 and any such decision shall be binding on Seller 1
and all transferees and holders of the right to receive the Deferred Payment,
the Exchange Obligations or Exchange Notes, (iii) any amendments or
modifications to this Schedule 2.3 may be made and approved by Seller 1 and any
such amendment or modification shall be binding on Seller 1 and all transferees
and holders of the right to receive the Deferred Payment, the Exchange
Obligations or Exchange Notes, and (iv) a notice from any such transferee shall
be deemed delivered only if delivered by Seller 1.
ARTICLE 9
RIGHT OF SET-OFF
The Deferred Payment shall be subject to the Buyers' right of set-off
described in Section 8.6 of the Agreement; provided that such right of set-off
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shall be terminated if Seller 1 substitutes security for the performance of
Sellers' and Seller Parent's obligations under Article 8 of the Agreement, that
is acceptable to Buyer 1.
ARTICLE 10
SUBORDINATION
Seller 1's right to receive the Deferred Payment, as well as any Exchange
Obligations and/or Exchange Notes, are subject to the terms of that certain
Subordination Agreement, dated as of the Closing Date, by and among Buyer 1,
Seller 1 and the Administrative Agent.
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